REG - Ebiquity PLC - Final Results for the year ended 31 December 2022
30/03/2023 07:00
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RNS Number : 7534U Ebiquity PLC 30 March 2023
30 March 2023
Ebiquity plc
Final Results for the year ended 31 December 2022
Delivering a strong performance with continued opportunities for growth
Ebiquity plc ("Ebiquity", the "Company" or the "Group"), a leading global
player in media investment analysis, operating in the US$930 billion global
advertising market(1), announces its results for the year ended 31 December
2022.
Financial Highlights(2)
Year ended 31 December 2022 2021 Change
£m £m £m %
Revenue 76.0 63.1 12.9 20%
Adjusted Operating Profit(2) 9.3 4.7 4.6 98%
Adjusted Operating Profit Margin % 12% 7% - 5 pp
Adjusted Profit before Tax(2) 8.0 4.1 3.9 95%
Adjusted Earnings per Share(2) 5.4p 2.7p 2.7p 98%
Statutory Operating Loss (5.9) (5.1) (0.8) 16%
Statutory Loss before Tax (7.2) (5.7) (1.5) 26%
Statutory Loss per Share (6.9)p (8.5)p 1.6p -
(1)Source eMarketer
(2) In the reporting of financial information, the Directors have adopted
various alternative performance measures ('APMs'). Details of their
calculation are set out in page17 of this statement.
· Revenue increased by £12.9 million (20%) to £76.0 million and
organically by £5.7 million (9%)
· Adjusted operating profit increased by 98% to £9.3 million
· Adjusted operating profit margin increased by 5 percentage points to
12%
· Acquisitions in the period contributed revenue of £6.8 million
· Statutory operating loss increased by £0.8 million to £5.9 million
(2021: £5.1 million) as a result of the increased level of highlighted items
up by £6.1 million to £15.2 million (2020: £9.3 million)
· Highlighted items include accruals in the period of £7.9 million
towards the contingent consideration for the acquisition of Digital Decisions
B.V of £15.8 million, payable in 2023 (based on its strong performance in
2021 and 2022)
· Net debt of £9.1 million: cash balances of £12.4 million and bank
borrowings of £21.5 million as at 31 December 2022 with undrawn bank
facilities of £8.5 million
· Statutory cashflow from operations of £1.1 million (2021: £8.7
million)
· Adjusted cashflow from operations of £6.2 million (2021: £13.2
million), representing cash conversion of 67%
Strong operational performance
· Improved profitability across all regions and business units
· Significant growth from the Media performance service line
· Higher margin Digital Media Solutions revenue increased by 76% to
£6.5 million
· Major new assignments won including Shell, HSBC, Philips, Pepsico
Growth outlook
· Trading in the current year has started in line with the Board's
expectations, with continued growth momentum and opportunities for operational
efficiencies
( )
Retirement of Chief Financial Officer and Chief Operating Officer
· Alan Newman will be retiring at the end of June. Our search for his
replacement is well advanced. He has made a significant contribution to the
business and the Board wishes him all the best for the future
( )
Nick Waters, Chief Executive Officer, said:
"We have delivered a strong performance in 2022 and made significant progress
against our strategic objectives and target operating metrics. This has
resulted in a significant increase in revenue, which was up 20%, including
organic growth of 9% and adjusted operating profit almost doubling. It is
particularly pleasing that we have also seen a strong adjusted profit margin
improvement from 7% in FY21 to 12% in FY22, especially as this was achieved
against a challenging economic environment.
We made three important acquisitions in 2022. The acquisition of Media
Management Inc doubled the size of our business in the USA - the world's
largest advertising market - and enhanced our service offering. Media Path
Network, headquartered in Sweden, has brought a high-quality data management
platform which will enhance our operating efficiency. The acquisition of
Forde and Semple gained us entry into the Canadian market. The integration of
all three companies has progressed well.
Revenue from our portfolio of Digital Media Solutions continued to grow
strongly and maintained a high margin. Geographically, in addition to
scaling the North America and European businesses, our Asia Pacific region
continued to grow well.
Additionally, the demand for our services was strong and we won a wide range
of new mandates from major clients including Shell, HSBC, Jaguar Land Rover,
Philips and Pepsico, demonstrating the competitive strength of our business.
As we look to 2023, we see continued growth opportunities. The global media
market is highly complex, creating significant challenges for our clients,
brand marketers. Ebiquity's expanding product and service offering, breadth
of geographic presence, and depth of expertise makes us well placed to fulfil
advertisers' needs. Trading in the current year has started in line with
expectations."
Details of presentations
The Executive Directors will host a webcast presentation for analysts at 09:30
BST today. If you would like to register to attend, please contact
phoebe.a.pugh@camarco.co.uk .
They will also give a presentation via the Investor Meet Company platform on
Monday 3 April at 09:00 BST. The presentation is open to all existing and
potential shareholders. Questions can be submitted pre-event via the Investor
Meet Company dashboard up until 09:00 BST on the day before the meeting or at
any time during the live presentation. Investors can sign up to Investor
Meet Company for free and add to meet Ebiquity plc via:
https://www.investormeetcompany.com/ebiquity-plc/register-investor
(https://www.investormeetcompany.com/ebiquity-plc/register-investor) .
Investors who already follow Ebiquity plc on the Investor Meet Company
platform will automatically be invited.
Market abuse regulation
This announcement contains inside information for the purposes of Article 7 of
Regulation (EU) No 596/2014 as it forms part of UK domestic law by virtue of
the European Union (Withdrawal) Act 2018 ("UK MAR"). Upon the publication of
this announcement via a Regulatory Information Service this inside information
is now considered to be in the public domain.
The person responsible for arranging release of this announcement on behalf of
the Company is Alan Newman, Chief Financial Officer and Chief Operating
Officer of the Company.
Ebiquity plc +44 20 7650 9600
Nick Waters, CEO
Alan Newman, CFO & COO
Camarco
Ben Woodford +44 7990 653 341
Geoffrey Pelham-Lane +44 7733 124 226
Panmure Gordon (Financial Adviser, Nomad and Broker) +44 20 7886 2500
Dominic Morley / Dougie McLeod (Corporate Advisory)
Mark Murphy/ Sam Elder (Corporate Broking)
About Ebiquity plc
Ebiquity plc (LSE AIM: EBQ) is a world leader in media investment analysis. It
harnesses the power of data to provide independent, fact-based advice,
enabling brand owners to perfect media investment decisions and improve
business outcomes. Ebiquity is able to provide independent, unbiased advice
and solutions to brands because we have no commercial interest in any part of
the media supply chain.
We are a data-driven solutions company helping brand owners drive efficiency
and effectiveness from their media spend, eliminating wastage and creating
value. We provide analysis and solutions through five Service Lines: Media
management, Media performance, Marketing effectiveness, Technology advisory
and Contract compliance.
Ebiquity's clients are served by more than 500 media specialists, covering 80%
of the global advertising market.
The Company has the most comprehensive, independent view of today's global
media market, analysing US$55bn of media spend from 75 markets annually,
including trillions of digital media impressions. Our Contract compliance
division, FirmDecisions, audits US$40bn of contract value annually.
As a result, over 70 of the world's top 100 advertisers today choose Ebiquity
as a trusted independent media advisor.
For further information, please visit: www.ebiquity.com
(http://www.ebiquity.com)
Chair's Statement
During 2022, we have seen the benefits resulting from our strategy of
refocussing the business and of the transformation programme under way in our
products, management, operational processes and technology platform. As a
result, the Group is reporting a strong performance with revenue, adjusted
operating profit and adjusted profit margins all increasing significantly
compared to 2021. This reflects good organic revenue growth of 9% as well as
the contribution from the three acquisitions made in the year.
This performance has been achieved despite evident challenges in the political
and economic environment affecting our clients, many of whose businesses
operate globally, including the impact of the war in Ukraine and the recent
rapid increase in inflation in most economies.
The Group's statutory operating loss increased to £5.9 million. This is
impacted by highlighted items of £15.2 million, a number of which will not
recur in future periods.
We are also announcing today that Alan Newman our Chief Financial Officer and
Chief Operating Officer, will be retiring at the end of June. Our search for
his replacement is well advanced and we will provide an update on this in due
course. I should like to take the opportunity, on behalf of myself and the
Board, to thank Alan for his hard work and commitment to the Group over the
past four years. He has made a significant contribution to the successful
development and re-positioning of our business during that time. We wish him
all the best for the future.
On behalf of the Board, I would also like to thank all of our employees for
their hard work, creativity and commitment this year. In recognition of
the cost-of-living challenges faced by our staff, the Group was pleased to
make a one-off payment in October to support those who were more in need.
Although the impact of the Covid pandemic generally reduced this year, we note
that our staff and business in China continued to experience disruptions.
It is pleasing to report that Digital Decisions, which we acquired as an early
stage start up in 2020, has more than met expectations over the last three
years, both in spearheading the development of our Digital Media Solutions
business line and in the revenue and profit contribution it has delivered to
the Group.
During the year we made three acquisitions: Media Path Network, a global
business based in Europe; Media Management LLC (MMi) in the USA and our
external partner in Canada, Forde and Semple. The integration of these
acquisitions is progressing well. They are already helping to transform our
business and have increased our global scale and client coverage in key
markets, as well as enhancing our earnings. As set out in our strategy, we
will continue to explore opportunities to build further capability in key
media markets.
The divestment of our shareholding in the Russian business, as previously
announced, is in process, although it remains subject to Russian government
approval.
As a leading global provider of media investment analysis, Ebiquity continues
to ensure that it supports the needs of advertisers in navigating the
fast-changing media landscape. Ebiquity's core strengths include our media
expertise, independence and ability to develop innovative products as new
media channels emerge. We deploy these through our international network,
now present in 18 countries and our team of media specialists located across
it, both of which are unmatched in our sector. We recognise that our growth
also depends on our ability to deepen relationships with existing clients and
to win new mandates on the strength of our offering. Our team's focus on
improving the management of key client relationships has contributed to our
successful growth in the past year.
During the year, we have continued on our ESG journey. We have measured our
Scope 1-3 consumption across our top six markets (81% of our business) and
from this we identified the major areas to address. As expected for a
professional services company, our consumption is dominated by Scope 3
emissions, which account for over 90% of our total emissions. The key
categories are purchased goods and services, fuel and energy related
activities, waste generation and travel. Actions being taken to reduce our
consumption include having a hybrid working policy, guidance for business
travel and analysis of our supply chain. During 2023 we will begin planning
our pathway to net zero and prepare to report under the new UK regulations on
Climate-Related disclosure in 2024.
Ebiquity's market opportunity within the global advertising market is huge as
digital advertising continues to develop fast and our clients face
increasingly complex challenges in managing their advertising investments.
We have a clear strategy for capitalising on this opportunity and enhancing
our leadership position. Our results this year demonstrate our management
team's ability to deliver growth and to improve profitability. They have a
comprehensive plan for further improving margins over the medium term through
process efficiency, use of our technology platforms and deployment of
resources in line with our global scale. While ensuring we deliver organic
growth, we will also consider opportunities to make further acquisitions that
benefit our business.
The Board and I remain confident that Ebiquity is well placed to deliver
growth and value to our shareholders.
Rob Woodward
Chair
Chief Executive Officer's Review
Unique market position
Ebiquity's purpose is simple. We exist to help brand owners increase returns
from their media investments and so improve business performance. We do this
by analysing billions of dollars of advertising spend globally, as well as
trillions of advertising impressions. Using this intelligence, we provide
independent, fact-based advice which enables brands to drive efficiency and
increase effectiveness. Our work helps to eliminate wasteful advertising spend
and to create value.
As the world leader in media investment analysis, we count over 70 of the
world's top 100 advertisers as our clients. We are entirely independent of the
media supply chain, which enables us to provide clients with objective,
unbiased advice. We do this through our global network of over 600 media
specialists based in 18 countries, which covers some 80% of the world's
advertising spend.
We operate in a very large global advertising market, which is worth over
US$930 billion per year (Source:- eMarketer). We analyse c. US$100 billion of
global media investment and contract value annually, including more than a
trillion digital media impressions. Some two-thirds of this is spent through
digital media channels.
A year of delivery
I am very pleased with our performance during the year. We are delivering
effectively against our four key strategic objectives which are to: develop
higher value strategic relationships with more clients; develop productised
solutions for the digital market; improve operating efficiency; and increase
scale in the US and Asia Pacific. As a result, we have delivered a strong
revenue performance up 20% to £76 million, and up organically by 9%, with
adjusted operating profit almost doubled to £9.3 million. It is
particularly pleasing that we have also seen a strong adjusted profit margin
improvement from 7% in FY21 to 12% in FY22, especially as this was achieved
within a challenging economic environment.
Our performance reflected a good contribution from our largest service line,
Media Performance, where revenue grew by 33%, benefiting from our three
acquisitions during the year and the growth of Digital Media Solutions within
it. Contract Compliance was the standout organic performer with 25% revenue
growth. Marketing Effectiveness was flat year on year but its profitability
improved reflecting strong discipline in declining several large but
unprofitable renewals. Media Management had a more challenging year with
revenue declining by 6%, reflecting lower agency selection activity in the
market compared to the post-pandemic "surge" year of 2021. During the year
Tech Advisory, our smallest service line, became part of Media Management
within which it is a more natural fit.
Acquisitions driving growth
We made two transformative acquisitions in 2022: Media Management LLC (MMi)
in the USA and Media Path Network AB (Media Path) in Europe. The US
acquisition has enabled us to more than double our size in the world's biggest
advertising market and significantly increased our penetration of large US
advertisers. With the acquisition of Media Path we have a globally distributed
business managed from Sweden, operating a high quality technology platform,
which is providing us with an effective base from which to drive greater
efficiency in the delivery of our services Group-wide. We have made good
progress in integrating these businesses, having successfully started the
process of transitioning client work to the GMP365 technology platform We also
delivered synergy benefits in the year in line with our stated goal of
achieving £5 million annualised benefits by 2025. Importantly, both
acquisitions have contributed positively to these results. In addition, we
also made the small, tactical acquisition of Ford & Semple (now renamed
Ebiquity Canada) to provide us with further scale in North America. As part of
accelerating our growth we will continue to identify suitable acquisition
opportunities.
Product Innovation driving growth
One of the key drivers of our growth has been the development of innovative
Digital Media Solutions that meet client needs. We now have seven productised
Digital Media Solutions in the market, with the global Digital Governance
programme representing the core solution to which other products are often
added. The demand for these products has enabled us to increase DMS revenue by
76% to £6.5 million (2021: £3.7 million) and to deliver a margin of over
50%. Underpinning this performance are the major strides we have made against
the target operational metrics we set ourselves (see Table below). 55 clients
now buy one or more Digital Media Solutions, up from 28 last year, and we are
ahead of expectations in terms of the deep pool of data we are able to
analyse. This now covers 1.4 trillion digital media impressions worth US$6.6bn
annually. The number of markets to which our analysis extends now stands at
91, up from 87 last year, further demonstrating our ability to provide
visibility and advice to the largest global advertisers across the entire
geographical breadth of their operations. Our most recent new product
development is a solution for Advanced Television, which is in a pilot stage
in the USA and we also have a Retail Media solution under development.
One of the main products that we developed during the year was a Responsible
Media Investment solution which supports advertisers in their efforts to
improve governance of their media investments. It provides clients with
visibility on whether their media spend is funding bad actors, namely
publishers guilty of distributing disinformation or intellectual property
theft, promoting hate speech, or aiding "Made for Advertising" websites that
siphon off media investment without providing any value to the brand owner.
This is not only an important landscape for our clients to navigate carefully
but also one where we want to play an active role in providing a solution. We
have therefore become a Signatory to the EU Code of Practice on Disinformation
and are supporting the EU and its member states in reducing funding of
disinformation.
In this spirit, we have also continued to lead our market in thought
leadership, shaping industry debate on major topics and responding to market
events. One of the major initiatives we undertook was to produce our first
study using Scope3 data to measure the CO(2) impact of digital advertising.
In "The Hidden Cost of Digital Advertising" we found that a sample of 116
billion impressions from US$375m spend across 43 advertisers in 11 markets
generated 77,826 metric tonnes of CO(2) - an average of 670 grammes per 1,000
impressions - the equivalent of flying c. 1.35m passengers from London to
Paris. This quantum of CO(2) emissions would take 3.7m trees a year to absorb.
As a result of this study, we have introduced a new metric CO2PM (grams of
CO(2) equivalents per 1,000 impressions) which we believe should be adopted
immediately by the industry as a core metric to influence decision making and
lead technology and media partners to optimise their practices to increase
sustainability.
Operational metrics
Underpinning this year's performance are the major strides we have made
against the target operational metrics as shown in the table below
Table 1: Operational Metrics
Key Performance Indicator Baseline 2020 2021 actual 2022
actual
No. of clients buying one or more products from the new digital portfolio 10 28 55
Volume of digital advertising monitored (trillions of impressions) 0.1 0.6 1.4
Value of digital advertising monitored (billions of spend US$) 0.5 3.0 6.6
No. of countries served with new digital products 50 87 91
No. of clients buying two or more Services Lines 58 76 97
% of revenue from digital services 25% 29% 32%
Strong client relationships driving growth
Ebiquity's primary target market comprises the world's top 100 advertisers.
Our strategy is to develop high value relationships from an increasing number
of key clients. We have made good progress against this ambition with the
number of clients buying two or more Service Lines rising from 76 in 2021 to
97 in 2022. The demand for our services remains strong and we have won a
number of significant new clients including Philips, Upfield, Qatar Tourism
and Kering.
Creating a more efficient business
An unrelenting focus on improving our operating efficiency has helped to
deliver the strong improvement in adjusted operating margin in FY22. We have
reduced production costs by 4% compared to the prior year and took a number of
other actions to improve productivity. These included not renewing
unprofitable assignments and increasing revenues from higher margin digital
solutions through a better product mix. In addition, our Media Operations
Centre in Madrid continues to deliver economies of scale, with 20% more
productive hours delivered this year as a result of further transfer of work
to it from market units. One of the primary strategic reasons for acquiring
MMi was not only to increase our scale in the US, which has historically been
underweight, but also for the operational efficiency it would deliver. The
integration has gone well and we delivered cost synergies by the year-end in
line with our plans. We have also begun the initial migration of clients to
Media Path's GMP365 platform which will realise cost efficiencies through
better use of automation. It is pleasing to note that we have maintained
strong cost control while also being able to make a one-off cost of living
relief payment to those of our staff who were most in need.
Further growth potential
Our priority is to increase scale in the USA and Asia Pacific, while also
maintaining growth in Europe. Both priority markets have delivered strong
performances. In the USA, the acquisition of MMi helped North America
revenue to grow by 138%. Asia Pacific delivered growth of 18%, all organic,
despite a challenging market in China where the zero Covid policy hindered
economic activity and business generation. Revenue in Europe which now
includes Media Path also grew strongly overall as well as in organic terms.
As previously reported, we are in the process of divesting the majority stake
in our small Russian operation (2021 revenue of £1 million) but this
transaction is subject to approval by the Russian government. An impairment
provision of £0.3 million has been made against the Russian company assets in
the Group balance sheet.
Growth outlook
The global media market is highly dynamic and changing rapidly, with the
long-held hegemony of the Alphabet and Meta duopoly under pressure, alongside
an explosive increase of media investment into Advanced Television and
Commerce Media channels. In such a rapidly evolving and complex environment,
it becomes more challenging for advertisers to understand the relative
effectiveness and efficiency of channel options. As the market leader, we
believe demand for our services will continue to increase as independent
scrutiny of the effectiveness of these investments becomes even more
important. In addition, we also expect to benefit from more assignments being
put out to pitch as advertisers face continued inflationary pressures.
The dynamics of the advertising market continue to offer opportunities to
Ebiquity and with our increased scale in key global markets, product
innovation capability and leadership position, we remain well positioned for
further growth.
Nick Waters
Chief Executive Officer
Performance Review
With a strategic focus on accelerating growth in North America and Asia
Pacific we are providing segmental reporting by geography as a more
appropriate reflection of the way that the Group is now managed.
The three acquisitions have added further scale to Media Performance, our
largest service line. Tech Advisory, the smallest service line, has now been
incorporated into the Media Management service line. We will therefore
deliver our offering through four service lines - Media Management, Media
Performance, Marketing Effectiveness, and Contract Compliance - across four
geographic business units of North America, UK & Ireland, Continental
Europe and Asia Pacific. The revenue from each geographic segment and
service line is shown in the tables below, as is the adjusted operating profit
of each segment.
Revenue by Segment
Revenue
Segment
FY22 FY21 Variance
£m £m £m %
UK & Ireland 31.5 32.3 (0.8) (3%)
Continental Europe 21.9 17.4 4.5 26%
North America 13.3 5.6 7.7 138%
APAC 9.3 7.9 1.4 18%
Total 76.0 63.1 12.9 20%
Revenue in North America more than doubled in 2022. This was due to the
contributions from MMi and Canada as well as organic growth of 73% delivered
in line with our plans, including successful expansion of Digital Media
Solutions and Contract Compliance services among US clients. European
revenue grew by 26% including Media Path, and organically by 6%. Within the
region the best performers were France and Spain, which grew by 46% and 14%
respectively. APAC revenue continued to grow well at 18%, with our Singapore
unit up by 80%, reflecting new business wins among regionally based clients
and China up by 11%, despite the challenges posed by extended lock down
periods. In UK & Ireland, our largest and most mature region, revenue
from UK domestic media work increased by 6%, although revenue from
international projects fell by 13% in part due to lower global agency pitch
activity among its clients.
Revenue by service line
Revenue
Service Line
FY22 FY21 Variance
£m £m £m %
Media Performance 50.3 37.9 12.4 33%
Media Management 8.1 8.6 (0.5) (6%)
Contract Compliance 7.6 6.1 1.5 25%
Marketing Effectiveness 8.3 8.3 - -
Technology Advisory 1.7 2.2 (0.5) (23%)
Total 76.0 63.1 12.9 20%
Our Media Performance service line helps clients to assess and optimise their
media buying performance through services such as savings tracking,
benchmarking and Digital Media Solutions. This was already our largest service
and was boosted by the three acquisitions made in 2022, most of whose revenue
arises from this area. Within this, Digital Media Solutions grew by 76%,
with the core digital governance monitoring solution accounting for 60% of the
total, while new solutions (such as Responsible Media Investment and Digital
Value Index) launched over the past two years have also grown fast.
Revenue from Media Management services, which includes agency selection
advice, fell by 6% due largely to the reduction in agency tendering activity
by advertisers compared to 2021, which had been a very active year. We
retained a high market share of global tenders run in the market. Contract
Compliance service revenue increased by 25% reflecting in particular the
success of initiatives to win new clients in North America (where revenue was
up by 259%) with China and India also growing well.
Our Marketing Effectiveness service uses advanced analytics to help clients to
optimise their media plans and improve returns on investment from their media
spend. Revenue from this was static in the year. This reflected a focus on
improving margins through more robust pricing which has led to a more
profitable mix of clients, including several significant wins in the year.
Within Technology Advisory, the 23% decrease in revenue was due in part to the
integration of the UK AdTech service within other areas and to a 7% reduction
in Digital Balance, based in Australia, which optimises website performance.
From 2023 onwards, this will no longer be a separate segment.
Adjusted Operating Profit by Segment
Adjusted Operating Profit Adjusted operating profit margin
FY22 FY21 Variance FY22 FY21
£m £m £m % % %
UK & Ireland 6.6 7.1 (0.5) (6%) 21% 22%
Continental Europe 6.4 4.1 2.7 63% 30% 24%
North America 0.9 (0.6) 1.5 - 7% (11)%
APAC 1.9 0.8 1.1 150% 21% 11%
Reportable segments 15.9 11.4 4.5 42% 21% 18%
Unallocated (6.5) (6.7) 0.2 3% (9)% (11)%
Total 9.3 4.7 4.6 98% 12% 8%
UK & Ireland remained our highest profit generating region, reflecting its
size, although its operating profit and margin fell slightly reflecting its
revenue performance. Continental Europe increased both its operating profit
(by 63%) and margin (by 6 percentage points) significantly in the year due in
part to the contribution from Media Path as well as to increased profitability
in France, Spain and Italy reflecting revenue gains and efficiency
improvements. As planned, North America successfully completed the
turnaround into becoming a profitable region due in part to the MMi
acquisition and delivery of initial synergy benefits as well as revenue growth
in the existing business. APAC's 42% growth in operating profit and almost
doubling of the margin reflects its revenue performance and focus on winning
higher value clients. Central (unallocated) costs reduced slightly in the
year due in part to tight cost management and to the benefit of realised
foreign exchange gains which are accounted for centrally. The reduction in the
percentage of Group revenue that these costs represent also indicates the
scale benefits resulting from the expansion of our operations in the past
year.
Financial Review
The commentary in this review focusses largely on alternative performance
measures ('APMs') adopted by the Group. These non-GAAP measures are considered
both useful and necessary in helping to explain the performance of the Group.
These APMs are consistent with how business performance is measured internally
by the Group. Further details of the APMs are given on page 17.
Summary Income Statement
2022 2021 Change
£m £m £m %
Revenue 76.0 63.1 12.9 20%
Project Related Costs (7.2) (7.5) 0.3 (4)%
Net Revenue 68.8 55.6 13.2 24%
Staff Costs(1) (48.0) (38.3) (9.7) 25%
Other operating expenses(1) (11.5) (12.5) 1.0 (8)%
Adjusted Operating Profit 9.3 4.7 4.6 96%
Highlighted Items (before tax) (15.2) (9.8) (5.4) 33%
Statutory Operating Loss (5.9) (5.1) (0.8) 16%
(1. excluding highlighted items)
Group revenues for the year ended 31 December 2022 increased by £12.9 million
(20%) to £76.0 million, from £63.1 million in 2021. This included revenue
of £6.8 million from companies acquired during the year. Excluding this,
Group revenue grew organically by 10%.
Adjusted operating profit (statutory operating profit excluding highlighted
items) for 2022 was £9.3 million, an increase of £4.6 million or 96%
compared to 2021. The adjusted operating margin also increased significantly
to 12% from 7% in the prior year.
Project-related costs (which comprise external partner and production costs)
reduced by 4% to £7.2 million from £7.5 million, as these costs are much
lower for Digital Media Solutions and the acquired businesses. Total
adjusted operating expenses increased by 17% to £59.5 million, reflecting in
part the expenses of the acquired businesses. Within this, staff costs
increased by 25% to £48.0 million and other operating expenses reduced by 8%
to £11.5 million.
Adjusted profit before tax increased by 95% to £8.0 million in 2022 (2021:
profit of £4.1 million). Net finance costs increased to £1.3 million in
2022 from £0.6 million in 2021, due to higher interest rates and an increase
in bank borrowings of £3.5 million due to the acquisitions.
Highlighted items before tax, including the post-date renumeration relating to
the acquisition of Digital Decisions BV, increased to £15.2 million cost from
£9.8 million in 2021, as detailed below. As a result, there was a
statutory operating loss (after highlighted items) of £5.9 million compared
to a loss of £5.1m in 2021. Reflecting this, the statutory loss before
taxation increased to £7.2 million from £5.7 million.
Taxation
There was a tax charge of £0.3 million in the year (2021: £1.2 million) of
which £2.1 million related to the adjusted profit before taxation (2021:
£1.7 million) and a £1.8 million credit (2021: £0.5 million credit) to the
highlighted items. The effective tax rate on adjusted profit before tax was
21%, (excluding movements on prior year provisions) compared to 42% in 2021.
The reduction in this rate is largely due to the utilisation of tax losses in
USA in the current year and recognition of US and UK tax losses as a deferred
tax asset. The adjusted profit after taxation increased by 149% to £5.9
million (2021: £2.4 million). The statutory loss after taxation increased to
£7.5 million from £6.9 million.
Earnings per share
Adjusted basic earnings per share doubled to 5.4p from 2.7p in 2021,
reflecting the increase in adjusted profit after taxation, offset by the
increase in the number of shares in issue due to the equity placing in the
year. The statutory basic loss per share reduced to 6.9p from 8.5p in 2021.
Highlighted items
Highlighted items comprise charges and credits which are highlighted in the
income statement because separate disclosure is considered relevant in
understanding the underlying performance of the business. Highlighted items
after tax in the year totalled a charge of £13.4 million (2021: £9.3
million) and include the following:
· £7.9 million charge to accrue for post-date remuneration payable in
2023 relating to the acquisition of Digital Decisions BV, acquired in January
2020 (2021: £7.9 million)
· £2.7 million charge for amortisation of purchased intangibles (2021:
£1.1 million)
· £1.9 million charge for professional costs relating to acquisitions
and bank facility agreements (2021: £0.3 million)
· £1.2 million charge relating to onerous lease provisions
· £0.6 million charge relating to severance and reorganisation costs
(2021: £0.1 million)
· £0.5 million charge relating to share-based payments (2021: £0.5
million)
· £0.3 million charge for the impairment of the assets of the Russian
subsidiary
· £1.8 million tax credit on highlighted items (2021: £0.5 million
credit)
The contingent consideration payable in 2023 relating to the acquisition of
Digital Decisions BV has been accounted for as post-date remuneration as
payment is dependent upon the principal vendor remaining in employment with
the Group. The total deferred consideration payable is estimated at £15.8
million and is calculated as six times the average profit generated in the two
years ended 31 December 2022 from Digital Media Solutions developed by the
Digital Innovation Centre, less the initial consideration of £700,000 paid in
January 2020. It is payable in a mixture of cash and/or Ebiquity shares which
the Company will determine at the time of payment, having regard to its
overall capital structure, debt facilities and the vendor's option to request
that a certain amount be paid in cash.
Amortisation of purchased intangibles increased to £2.7 million due to the
acquisitions whose intangible assets have been included at fair value. The
charge in the year relating to Media Path and MMi was £2.1 million.
The acquisition, integration, and strategic costs of £1.9 million relate to
professional fees incurred for the three acquisitions in the year, the
associated equity capital raise in April 2022, and the revised bank loan
facility agreed in March 2022.
The onerous lease provision charge of £1.2 million relates to office space in
three cities which is surplus to requirements. During the year, it was decided
to vacate the New York office and part of the London office and to seek
sub-tenants in the market. A charge in the year of £1.7 million has been made
for these offices to reflect the impairment of the right-of-use asset. This
is offset by a credit of £0.5 million relating to the Chicago office which
was vacated and sub-let in 2019 and for which the headlease has now been
terminated with effect from September 2023.
Dividend
No dividend has been declared or recommended for either of the twelve months
ended 31 December 2022 or 2021.
Cash conversion
Year ended Year ended
31 December 31 December
2022 2021
£'000 £'000
Reported cash from operations 3,812 11,800
Adjusted cash from operations 6,188 13,201
Adjusted operating profit 9,270 4,738
Adjusted Cash Conversion Ratio 67% 278%
Adjusted cash from operations represents the cash flows from operations
excluding the impact of highlighted items. The adjusted net cash inflow from
operations during 2022 was £6.2 million (2021: £13.2 million which
represents a cash conversion ratio of 67% of adjusted operating profit.
Equity
During the year, the issued share capital increased by 14% to 120,241,181
shares (2021: 82,728,890 shares) as a result of the issue of 36,958,789 shares
in connection with the acquisitions made in the year and 553,502 shares issued
following the exercise of share options.
Net debt and banking facilities
31 December 31 December
2022 2021
£'000 £'000
Net cash(1) 12,360 13,134
Bank debt (21,500) (18,000)
Net Bank Debt (9,140) (4,866)
1 Includes restricted cash of £1.2 million held in Ebiquity Russia
All bank borrowings are held jointly with Barclays and NatWest. The current
revolving credit facility ("RCF") facility was agreed in March 2022 and runs
for a period of 3 years to March 2025, extendable for up to a further two
years with a total commitment of £30 million. £21.5 million had been drawn
as at 31 December 2022 (2021: £18 million). Under this agreement, annual
reductions in the facility of £1.25 million will apply from June 2023. The
remainder of any drawings is repayable on the maturity of the facility. The
facility may be used for deferred consideration payments on past acquisitions,
to fund future potential acquisitions, and for general working capital
requirements. The quarterly covenants applied from June 2022 onwards are:
interest cover > 4.0x; adjusted leverage < 2.5x and adjusted deferred
consideration leverage < 3.5x. There is no longer a minimum lending
covenant.
Statement of financial position and net assets
A non-statutory summary of the Group's balance sheet as at 31 December 2022
and 31 December 2021 is set out below:
31 December 31 December
2022 2021
£'000 £'000
Goodwill and intangible assets 56,868 32,700
Right of use asset 3,308 4,542
Other non-current assets 3,488 3,053
Net working capital(1) 9,350 3,362
Lease liability (5,983) (6,390)
Other non-current liabilities (2,659) (1,477)
Digital Decisions post-date remuneration (15,787) (7,922)
Deferred consideration (MMI and Canada) (2,183) -
Net bank debt (9,140) (4,866)
Net assets 36,262 23,004
(1)Net working capital comprises trade and other receivables, lease
receivables, trade and other payables,
accruals and contract liabilities (less the Digital Decisions post-date
remuneration) and current tax assets and liabilities.
Net assets as at 31 December 2022 increased by £13.3 million due largely to
the acquisitions made in the year and the related share capital increase
offset by the statutory loss after taxation.
Working capital increased to £9.4 million from £3.4 million, a net outflow
of £6.0 million with trade receivables increasing by £11 million, offset by
an increase in trade and other payables of £5 million. The increase in
receivables was due in part to the acquisitions and to the phasing of billings
to clients towards the end of the year. Debtor days increased slightly to 67
days from 61 days.
Corporate Development Activities
On 29 January 2022, the Group acquired Forde and Semple Media Works, the
leading media performance consultancy in Canada, for a total consideration of
CAD$1.3 million (£0.8 million), of which CAD$1.2 million (£0.7 million) was
paid on completion and CAD$0.1 million (£0.06 million) was deferred for one
year. Forde and Semple had revenues of CAD$1.1m in the financial year ended 31
January 2021 and net assets of CAD$0.4 million (£0.2 million) on completion.
On 4 April 2022, the Group acquired Media Management, LLC ("MMi"), a US-based
media audit specialist, for an initial consideration of US$8.0 million (£6.1
million) with a deferred contingent consideration element payable in 2025.
84% of the initial consideration (US$6.7 million/£5.1 million) was paid in
cash and 16% (US$1.3 million /£1.0 million), was applied by the vendors to
subscribe for 1,737,261 Ebiquity ordinary shares. The contingent
consideration will be based on 1.0 times adjusted earnings before interest and
tax of the combined Ebiquity US and MMi businesses reported for the year
ending 31 December 2024. This has been estimated to be US4.0 million /£3.0
million. 80% of this will be payable directly in cash to the vendors and 20%
will be applied by the vendors to subscribe for Ebiquity ordinary shares.
On 22 April 2022, the Group acquired Media Path Network AB ("Media Path"), a
Swedish-based multi-national media consultancy, for a consideration of £15.5
million. 75% (£11,625,000) was paid in cash and 25% (£3,875,000) was paid
by the issue of 6,919,642 new Ordinary Shares to the Media Path vendors. An
additional cash payment of £485,000 was made in June 2022 representing
working capital in the completion accounts as at 31 March 2022 in excess of
the contractually agreed target amount.
Alan Newman
Chief Financial and Operating Officer
Alternative performance measures
In these results we refer to 'adjusted' and 'reported' results, as well as
other non-GAAP alternative performance measures.
Further details of highlighted items are set out within the financial
statements and the notes to the financial statements.
In the reporting of financial information, the Directors have adopted various
alternative performance measures ('APMs'). The Group includes these non-GAAP
measures as they consider them to be both useful and necessary to the readers
of the financial statements to help understand the performance of the Group.
The Group's measures may not be calculated in the same way as similarly titled
measures reported by other companies and therefore should be considered in
addition to IFRS measures. The APMs are consistent with how business
performance is measured internally by the Group.
Alternative Performance Measures used by the Group are:
· Net revenue
· Organic revenue growth
· Adjusted operating profit
· Adjusted operating margin
· Adjusted profit before tax
· Adjusted effective rate of tax
· Adjusted earnings per share
· Adjusted cash generated from operations, and
· Adjusted operating cash flow conversion.
Net revenue is the revenue after deducting external production costs and is
reconciled on the face of the income statement.
Organic revenue growth is defined as revenue growth in the existing business
excluding the revenue contribution in the year from acquisitions made during
it.
Adjusted operating profit, adjusted profit before taxation and adjusted profit
after taxation are reconciled to their statutory equivalents on the face of
the consolidated income statement. Adjusted earnings per share is
reconciled to statutory earnings per share in Note 9.
Adjusted effective tax rate is calculated by comparing the current and
deferred tax charge for the current year, excluding prior year provision
movements to the adjusted profit before taxation. The rate for the current
year is calculated as follows:
£'000 £'000
Adjusted Profit before Taxation A 7,967
UK Tax Current Year 114
Foreign Tax Current Year Taxation 1,973
Deferred Tax (380)
Adjusted Taxation B 1,707
Effective Tax Rate (A / B) 21%
Taxation figures are taken from Note 7 to the financial statements
Adjusted cash generated from operations is defined as the cash generated from
operations excluding the cash movements relating to the highlighted items.
The calculation for the year is set out below:
Year ended Year ended
31 December 2022 31 December 2021
£'000 £'000
Cash generated from operations 3,812 11,800
Add: Highlighted Items: cash items 2,514 (471)
Movement in working capital relating to highlighted items (138) 1,872
Adjusted cash generated from operations 6,188 13,201
Adjusted operating cash flow conversion is the ratio of the Adjusted cash
generated from operations divided by the Adjusted operating profit, expressed
as a percentage. The rate for the current year is calculated as follows:
£'000
Adjusted cash generated from operations 6,188
Adjusted operating profit 9,270
Cash Conversion Ratio 67%
Consolidated income statement
for the year ended 31 December 2022
31 December 2022 ( )31 December 2021
Note Before Highlighted Total Before Highlighted Total
highlighted items £'000 highlighted items £'000
items (note 3) items (note 3)
£'000 £'000 £'000 £'000
Revenue 2 75,973 - 75,973 63,091 - 63,091
Project-related costs (7,220) - (7,220) (7,525) - (7,525)
Net revenue 68,753 - 68,753 55,566 - 55,566
Staff costs (1) (47,977) - (47,977) (38,312) - (38,312)
Other operating expenses(1) (11,506) (15,168) (26,674) (12,517) (9,815) (22,331)
Operating profit/(loss) 9,270 (15,168) (5,898) 4,737 (9,815) (5,078)
Finance income 70 - 70 20 - 20
Finance expenses (1,422) - (1,422) (882) - (882)
Foreign exchange 49 - 49 229 - 229
Net finance costs (1,303) - (1,303) (633) - (633)
Profit/(loss) before taxation 7,967 (15,168) (7,201) 4,104 (9,815) (5,711)
Taxation (charge)/credit 4 (2,060) 1,799 (261) (1,737) 531 (1,206)
Profit/(loss) for the period 5,907 (13,369) (7,462) 2,367 (9,284) (6,917)
Attributable to:
Equity holders of the parent 5,874 (13,369)) (7,495) 2,250 (9,282) (7,032)
Non-controlling interests 33 - 33 117 (2) 115
5,907 (13,369) (7,462) 2,367 (9,284) (6,917)
Earnings/(Loss) per share
Basic 5 5.39p (6.88)p 2.72p (8.51)p
Diluted 5 4.46p (6.88)p 2.67p (8.51)p
(1) The cost categories reported in the income statement have been changed to
reflect the Group's internal reporting. The prior year comparatives have been
re-classified in the same way and there is no change in the total costs
reported. Details of each cost category are set out in Note 1.
The notes on pages 23 to 50 are an integral part of these financial
statements.
Consolidated statement of comprehensive income
for the year ended 31 December 2022
Year ended Year ended
31 December 31 December
2022 2021
£'000 £'000
Loss for the year (7,462) (6,917)
Other comprehensive income/(expense):
Items that will not be reclassified subsequently to profit or loss
Exchange differences on translation of overseas subsidiaries 252 (889)
Total other comprehensive income/(expense) for the year 252 (889)
Total comprehensive expense for the year (7,210) (7,806)
Attributable to:
Equity holders of the parent (7,243) (7,921)
Non‑controlling interests 33 115
(7,210) (7,806)
The notes on pages 23 to 50 are an integral part of these financial
statements.
Consolidated statement of financial position
as at 31 December 2022
Note 31 December Restated
2022 31 December
£'000 2021
£'000
Non‑current assets
Goodwill 7 43,091 28,172
Other intangible assets 8 12,776 4,528
Property, plant and equipment 1,289 1,512
Right-of-use assets 9 3,308 4,542
Lease receivables 9 - 155
Deferred tax asset 2,199 1,388
Total non‑current assets 62,663 40,297
Current assets
Trade and other receivables 10 33,163 21,934
Lease receivables 9 141 146
Corporation tax asset 845 1,268
Cash and cash equivalents 12,360 13,134
Total current assets 46,509 36,482
Total assets 109,172 76,779
Current liabilities
Trade and other payables 11 (10,049) (6,915)
Accruals and contract liabilities 12 (29,399) (19,350)
Financial liabilities 13 (61) -
Current tax liabilities (1,121) (1,642)
Provisions (17) -
Lease liabilities 9 (1,328) (2,566)
Total current liabilities (41,975) (30,473)
Non‑current liabilities
Financial liabilities 13 (23,357) (17,901)
Provisions (446) (493)
Lease liabilities 9 (4,654) (3,825)
Deferred tax liability (2,478) (1,083)
Total non‑current liabilities (30,935) (23,302)
Total liabilities (72,910) (53,775)
Total net assets 36,262 23,004
Equity
Ordinary shares 30,060 20,682
Share premium 10,863 255
Other reserves 4,824 4,572
Accumulated losses (9,787) (2,774)
Equity attributable to the owners of the parent 33,889 35,960
Non‑controlling interests 302 269
Total equity 36,262 23,004
The prior year balance sheet has been restated to correct the presentation of
current tax asset and current tax liability. See Note 1 for details.
The notes on pages 23 to 50 are an integral part of these financial
statements. The financial statements on pages 19 to 22 were approved and
authorised for issue by the Board of Directors on 30 March 2023 and were
signed on its behalf by:
Alan Newman
Chief Financial and Operating Officer
Ebiquity plc. Registered No 03967525
Consolidated statement of changes in equity
for the year ended 31 December 2022
Ordinary Share Other Retained Equity Non‑ Total
shares premium reserves(1) earnings attributable to owners of the parent controlling equity
£'000 £'000 £'000 £'000 £'000 interests £'000
£'000
31 December 2020 20,646 255 5,461 3,942 30,304 442 30,746
(Loss)/profit for the year 2021 - - - (7,032) (7,032) 115 (6,917)
Other comprehensive income - - (889) - (889) - (889)
Total comprehensive income/(expense) for the year - - (889) (7,032) (7,921) 115 (7,806)
Shares issued for cash 36 - - (3) 33 - 33
Share options charge - - - 319 319 - 319
Dividends paid to non-controlling interests - - - - - (288) (288)
31 December 2021 20,682 255 4,572 (2,774) 22,735 269 23,004
(Loss)/profit for the year 2022 - - - (7,495) (7,495) 33 (7,462)
Other comprehensive income - - 252 - 252 - 252
Total comprehensive income/(expense) for the year - - 252 (7,495) (7,243) 33 (7,210)
Shares issued for cash 9,240 10,608 - (39) 19,809 - 19,809
Share options charge 138 - - 521 659 - 659
Acquisitions - - - - - - -
Dividends paid to non-controlling interests - - - - - -
31 December 2022 30,060 10,863 4,824 (9,787) 35,960 302 36,262
1. Includes a credit of £3,667,000 (31 December 2021: £3,667,000) in the
merger reserve, a gain of £2,638,000 (31 December 2021: £2,383,000)
recognised in the translation reserve, partially offset by a debit balance of
£1,478,000 (31 December 2021: £1,478,000) in the ESOP reserve. Refer to
note 23 for further details.
The notes on pages 23 to 50 are an integral part of these financial
statements.
Consolidated statement of cash flows
for the year ended 31 December 2022
Note 31 December 31 December
2022 2021
£'000 £'000
Cash flows from operating activities
Cash generated from operations 15 3,812 11,800
Finance expenses paid (830) (626)
Finance income received 62 7
Income taxes paid (1,871) (2,492)
Net cash generated by operating activities 1,173 8,689
Cash flows from investing activities
Acquisition of subsidiaries, net of cash acquired (17,020) -
Payments to acquire non-controlling interest - (1,291)
Payments in respect of contingent consideration - (680)
Purchase of property, plant and equipment (274) (217)
Purchase of intangible assets 8 (175) (849)
Net cash (used in) investing activities (17,469) (3,037)
Cash flows from financing activities
Proceeds from issue of share capital (net of issue costs) 14,374 34
Proceeds from bank borrowings 13 4,500 -
Repayment of bank borrowings 13 (1,000) (1,000)
Bank loan fees paid 13 (300) -
Proceeds from government borrowings - (36)
Repayment of lease liabilities 9 (2,616) (2,108)
Dividends paid to non‑controlling interests - (157)
Net cash flow generated by/(used in) financing activities 14,958 (3,267)
Net (decrease)/increase in cash, cash equivalents and bank overdrafts (1,338) 2,385
Cash, cash equivalents and bank overdraft at beginning of year 13,134 11,121
Effects of exchange rate changes on cash and cash equivalents 564 (372)
Group cash and cash equivalents at the end of the year 12,360 13,134
The notes on pages 23 to 50 are an integral part of these financial
statements.
.
Notes to the consolidated financial statements
for the year ended 31 December 2022
1. Accounting policies
General information
Ebiquity plc (the 'Company') and its subsidiaries (together, the 'Group')
exists to help brands optimise return on investment from their marketing
spend, working with many of the world's leading advertisers to improve
marketing outcomes and enhance business performance. The Group has 20 offices
located in 18 countries across Europe, Asia and North America.
The Company is a public limited company, which is listed on the London Stock
Exchange's AIM and is limited by shares. The Company is incorporated and
domiciled in the UK. The address of its registered office is Chapter House, 16
Brunswick Place, London N1 6DZ.
Basis of preparation
The consolidated financial statements have been prepared in accordance with
UK-adopted international accounting standards (IFRS) in conformity with the
requirements of the Companies Act 2006 ('IFRS') and the applicable legal
requirements of the Companies Act 2006.
Prior year restatement
The prior year statement of financial position has been restated to reflect
the correct presentation of the company's current tax assets and current tax
liabilities which relate to tax due from/to tax authorities in various
jurisdictions. The restatement has the effect of reclassifying the 2021
current assets of £1,268k which were initially presented net of the company's
current tax liabilities to a separate line on the statement of financial
position.
2021 2021 Adjustment 2021
Reported Restated
£'000 £'000 £'000
Statement of financial position
Current tax asset - £1,268 £1,268
Current tax liabilities (£374) (£1,268) (£1,642)
Alternative Performance Measures ("APMs")
In the reporting of financial information, the Directors have adopted various
alternative performance measures ('APMs'). The Group includes these non-GAAP
measures as they consider them to be both useful and necessary to the readers
of the financial statements to help understand the performance of the Group.
The Group's measures may not be calculated in the same way as similarly titled
measures reported by other companies and therefore should be considered in
addition to IFRS measures. The APMs are consistent with how business
performance is measured internally by the Group. Details of the APMs and their
calculation are set out on page 17.
Highlighted items
Highlighted items comprise charges and credits which are highlighted in the
consolidated income statement as separate disclosure is considered by the
Directors to be relevant in understanding the adjusted performance of the
business. These may be income or cost items. Further details are included in
note 3.
Non‑cash highlighted items, which do not represent cash transactions in the
year, include share option charges, amortisation of purchased intangibles,
accruals for post-date remuneration and movements in tax and onerous lease
provisions. Other items include the costs associated with potential
acquisitions (where formal discussion is undertaken), completed acquisitions
and disposals and their subsequent integration into the Group, adjustments to
the estimates of contingent consideration on acquired entities, asset
impairment charges and restructuring costs.
Reclassification of cost categories reported in income statement
The cost categories reported in the income statement have been changed to:
project-related costs, staff costs and other operating expenses to reflect the
Group's internal reporting. The prior year comparatives have been
re-classified in the same way and there is no change in the total costs
reported. Details of each cost category are set out later in this note.
Going concern
The financial statements have been prepared on a going concern basis. The
Group meets its day-to-day working capital requirements through its cash
reserves and borrowings, described in note 19 to the financial statements. As
at 31 December 2022, the Group had cash balances of £12,360,000 (including
restricted cash of £1,049,000) and undrawn bank facilities available of
£8,500,000 and was cash generative and within its banking covenants.
During the year, the Group continued to trade within the limits of its banking
facility and associated covenants. In March 2022, this facility was increased
and extended to provide a total available of £30 million, initially for a
period of 3 years to March 2025 and extendable for up to a further two years.
Details of the facility terms and covenants applying are set out in note 19
below.
In assessing the going concern status of the Group and Company, the Directors
have considered the Group's forecasts and projections, taking account of
reasonably possible changes in trading performance and the Group's cash flows,
liquidity, and bank facilities. The Directors have prepared a model to
forecast covenant compliance and liquidity for the next twelve months that
includes a base case and scenarios to form a severe but plausible downside
case. For the purposes of this model, the terms of the new facility including
its covenant tests have been applied with effect from the quarter ending 30
June 2022.
The base case assumes growth in revenue and EBITDA based on the Group's budget
for the year ended 31 December 2023 and management projections for the year
ended 31 December 2024. The severe but plausible case assumes a downside
adjustment to revenue of 10% throughout the period with no reductions in
operating costs. Under both of these cases, there is headroom on covenant
compliance throughout the going concern period.
The Directors consider that the Group and Company will have sufficient
liquidity within existing bank facilities, totalling £30 million, to meet
their obligations during the next 12 months and hence consider it appropriate
to prepare the financial statements on a going concern basis.
Russian operation
Following the Russian invasion of Ukraine, the Group has been reviewing the
future of its subsidiary in Russia (Ebiquity Russia OOO) and has been in
negotiations with a view to divesting its 75.01% shareholding in it. Although
this subsidiary remains part of the Group for these financial statements,
given the uncertainty regarding this operation, an impairment provision of
£257,000 has been made against the value of its assets in the Group balance
sheet. Its cash balances are also deemed to be restricted cash. Details are
provided in note 3.
The financial statements have been prepared under the historical cost
convention, as modified by the revaluation of financial assets and financial
liabilities at fair value through profit or loss.
The consolidated financial statements are presented in pounds sterling and
rounded to the nearest thousand.
The principal accounting policies adopted in these consolidated financial
statements are set out below. These policies have been consistently applied to
all periods presented, unless otherwise stated.
Basis of consolidation
The consolidated financial statements incorporate the financial statements of
the Company and entities controlled by the Company (its subsidiaries). Control
is achieved where the Company has the power to govern the financial and
operating policies of an investee entity so as to obtain benefits from its
activities. The results of each subsidiary are included from the date that
control is transferred to the Group until the date that control ceases.
Where necessary, adjustments are made to the financial statements of
subsidiaries to bring the accounting policies used in line with those used by
the Group. All intra‑group transactions, balances, income and expenses are
eliminated on consolidation.
Non‑controlling interests represent the portion of the results and net
assets in subsidiaries that is not held by the Group.
Business combinations and goodwill
The Group applies the acquisition method to account for business combinations.
The cost of the acquisition is measured as the aggregate of the fair values,
at the date of exchange, of assets given, liabilities assumed, and equity
instruments issued by the Group in exchange for control of the acquiree. The
acquiree's identifiable assets, liabilities and contingent liabilities are
recognised initially at their fair value at the acquisition date. Goodwill is
initially measured at cost, being the excess of the aggregate of the
consideration transferred over the fair value of net identifiable assets
acquired and liabilities assumed. The determination of the fair values of
acquired assets and liabilities is based on judgement, and the Directors have
12 months from the date of the business combination to finalise the allocation
of the purchase price.
Goodwill is allocated to each of the Group's cash‑generating units expected
to benefit from the synergies of the combination. Following initial
recognition, goodwill is measured at cost less any accumulated impairment
losses. Goodwill is reviewed for impairment at least annually or whenever
there is evidence that it may be required. Any impairment is recognised
immediately in the income statement and is not subsequently reversed.
Goodwill arising on the acquisition of the Group's interest in an associate,
being the excess of the cost of acquisition over the Group's share of the fair
values of the identifiable net assets of the associate, is included within the
carrying amount of the investment. The non‑controlling shareholders'
interest in the acquiree is initially measured at the non‑controlling
interest's proportion of the net fair value of the assets, liabilities and
contingent liabilities recognised.
Where transactions with non‑controlling parties do not result in a change in
control, the difference between the fair value of the consideration paid or
received and the amount by which the non‑controlling interest is adjusted,
is recognised in equity.
Where the consideration for the acquisition includes a contingent
consideration arrangement, this is measured at fair value at the acquisition
date. Any subsequent changes to the fair value of the contingent consideration
are adjusted against the cost of the acquisition if they occur within the
measurement period and only if the changes relate to conditions existing at
the acquisition date. Any subsequent changes to the fair value of the
contingent consideration after the measurement period are recognised in the
income statement within other operating expenses as a highlighted item. The
carrying value of contingent consideration at the statement of financial
position date represents management's best estimate of the future payment at
that date, based on historical results and future forecasts.
All costs directly attributable to the business combination are expensed as
incurred and recorded in the income statement within highlighted items.
Revenue recognition
Revenue is recognised in accordance with IFRS 15 'Revenue from Contracts with
Customers'. Net revenue is the revenue after deducting external production
costs as shown in the income statement.
Revenue from providing services is recognised in the accounting period in
which the services are rendered. The revenue and profits recognised in the
period are based on the delivery of performance obligations and an assessment
of when control is transferred to the customer. Revenue is recognised either
when the performance obligation in the contract has been performed (thus a
'point-in-time' recognition) or over the time period during which control of
the performance obligation is transferred to the customer.
For fixed-price contracts, which represent the majority of cases, revenue is
recognised based on the actual service provided during the reporting period,
calculated as an appropriate proportion of the total services to be provided
under the contract. This reflects the fact that the customer receives and uses
the benefits of the service simultaneously. An input method or an output
method is used to measure progress of performance obligations depending on the
nature of the specific contract and project arrangements. Input methods are
typically based on costs incurred to date, relative to the total expected
costs for the project as substantially all work performed is primarily
represented by labour. Where appropriate, revenue may be recognised evenly
in line with the value delivered to the client, based on assignment of amounts
to the project milestones set out in the contract.
Where project fees are based on the labour hours spent and other expenses
incurred, revenue is recognised in line with the labour hours spent.
Estimates of revenues, costs or extent of progress toward completion are
revised if circumstances change. Any resulting increases or decreases in
estimated revenues or costs are reflected in profit or loss in the period in
which the circumstances that give rise to the revision become known by
management.
In the case of fixed-price contracts, the customer is billed for the fixed
amounts based on a billing schedule agreed as part of the contract.
Deferred and accrued income
The Group's customer contracts include a diverse range of payment schedules
which are often agreed at the inception of the contracts under which it
receives payments throughout the term of the arrangement. Payments for goods
and services transferred at a point in time may be at the delivery date, in
arrears or part payment in advance.
Where payments made to date are greater than the revenue recognised up to the
reporting date, the Group recognises a deferred income 'contract liability'
for this difference. Where payments made are less than the revenue recognised
up to the reporting date, the Group recognises an accrued income 'contract
asset' for this difference.
Project-related costs
Project-related costs comprise fees payable to external sub-contractors
("partners") who may undertake services in markets where the Group does not
have its own operations; costs of third-party data (e.g. audience measurement
data) used in projects; and, other out-of-pocket expenses (e.g. billable
travel) directly incurred in performance of services.
Staff costs
Staff costs comprise salaries payable to staff, employer social taxes,
healthcare, pension and other benefits, holiday pay, variable bonus expense
and freelancer costs.
Other operating expenses
Other operating expenses comprise all other costs incurred in operating the
business including sales and marketing, property, IT, non-client travel,
audit, legal and professional, staff recruitment and training, depreciation
and amortisation.
Finance income and expenses
Finance income and expense represents interest receivable and payable. Finance
income and expense is recognised on an accruals basis, based on the interest
rate applicable to each bank or loan account.
Foreign currencies
For the purposes of the consolidated financial statements, the results and
financial position of each Group company are expressed in pounds sterling,
which is the functional currency of the Company, and the presentation currency
for the consolidated financial statements.
In preparing the financial statements of the individual companies,
transactions in currencies other than the entity's functional currency
(foreign currencies) are recorded at the rates of exchange prevailing on the
dates of transactions. At each year-end date, monetary assets and liabilities
that are denominated in foreign currencies are retranslated at the rates
prevailing on the year‑end date.
For the purpose of presenting consolidated financial statements, the assets
and liabilities of the Group's foreign operations are translated at exchange
rates prevailing on the year‑end date. Income and expense items are
translated at the average exchange rate for the period, which approximates to
the rate applicable at the dates of the transactions.
The exchange differences arising from the retranslation of the year‑end
amounts of foreign subsidiaries and the difference on translation of the
results of those subsidiaries into the presentational currency of the Group
are recognised in the translation reserve. All other exchange differences are
dealt with through the consolidated income statement.
Taxation
The tax expense included in the consolidated income statement comprises
current and deferred tax. Current tax is the expected tax payable on the
taxable income for the year, using tax rates enacted or substantively enacted
by the year-end date.
The Group is subject to corporate taxes in a number of different jurisdictions
and judgement is required in determining the appropriate provision for
transactions where the ultimate tax determination is uncertain. In such
circumstances, the Group recognises liabilities for anticipated taxes based on
the best information available and where the anticipated liability is both
probable and estimable. Where the final outcome of such matters differs from
the amount recorded, any differences may impact the income tax and deferred
tax provisions in the year in which the final determination is made.
Tax is recognised in the consolidated income statement except to the extent
that it relates to items recognised directly in equity or other comprehensive
income, in which case it is recognised in equity.
Using the liability method, deferred tax is provided on all temporary
differences between the carrying amounts of assets and liabilities for
financial reporting purposes and their tax bases, except for differences
arising on:
· the initial recognition of goodwill;
· the initial recognition of an asset or liability in a transaction
which is not a business combination and at the time of the transaction affects
neither accounting nor taxable profit; and
· investments in subsidiaries and jointly controlled entities where
the Group is able to control the timing of the reversal of the difference and
it is probable that the difference will not reverse in the foreseeable future.
Recognition of deferred tax assets is restricted to those instances where it
is probable that taxable profit will be available against which the difference
can be utilised. The recognition of deferred tax assets is reviewed at each
year‑end date.
The amount of the asset or liability is determined using tax rates that have
been enacted or substantively enacted by the year‑end date and are expected
to apply when the deferred tax liabilities/assets are settled/recovered.
Deferred tax assets and liabilities are offset when the Group has a legally
enforceable right to offset current tax assets and liabilities and the
deferred tax assets and liabilities relate to taxes levied by the same tax
authority on either:
· the same taxable Group company; or
· different Group entities which intend either to settle current tax
assets and liabilities on a net basis, or to realise the assets and settle the
liabilities simultaneously, in each future period in which significant amounts
of deferred tax assets or liabilities are expected to be settled or recovered.
Property, plant and equipment
Property, plant and equipment is stated at cost less accumulated depreciation
and any recognised impairment loss.
Depreciation is charged so as to write off the cost of assets over their
estimated useful economic lives. The rates applied are as follows:
Motor vehicles Eight years straight-line
Fixtures, fittings, and equipment Three to nine years straight‑line
Computer equipment Two to four years straight‑line
Right-of-use assets - Period of the lease
leasehold improvements
Other intangible assets
Internally generated intangible assets - capitalised development costs
Internally generated intangible assets relate to bespoke computer software and
technology developed by the Group's internal software development team.
An internally generated intangible asset arising from the Group's development
expenditure is recognised only if all the following conditions are met:
· it is technically feasible to develop the asset so that it will be
available for use or sale;
· adequate resources are available to complete the development and to
use or sell the asset;
· there is an intention to complete the asset for use or sale;
· the Group is able to use or sell the intangible asset;
· it is probable that the asset created will generate future economic
benefits; and
· the development cost of the asset can be measured reliably.
Internally generated intangible assets are amortised on a straight‑line
basis over their useful lives. Amortisation commences when the asset is
available for use and useful lives range from three to five years. The
amortisation expense is included within other operating expenses. Where an
internally generated intangible asset cannot be recognised, development
expenditure is recognised as an expense in the period in which it is incurred.
Purchased intangible assets
Externally acquired intangible assets are initially recognised at cost and
subsequently amortised on a straight‑line basis over their useful economic
lives, which vary from three to 10 years. The amortisation expense is
included as a highlighted item in the income statement.
Intangible assets recognised on business combinations are recorded at fair
value at the acquisition date using appropriate valuation techniques where
they are separable from the acquired entity or give rise to other
contractual/legal rights. The significant intangibles recognised by the Group
include customer relationships, intellectual property, brand names and
software.
Computer software
Purchased computer software intangible assets are amortised on a
straight‑line basis over their useful lives, which vary from three to five
years.
Impairment
Assets that have an indefinite useful life are not subject to amortisation and
are tested annually for impairment.
For the purpose of impairment testing, goodwill is grouped at the lowest
levels for which there are separately identifiable cash flows, known as
cash‑generating units. If the recoverable amount of the cash‑generating
unit is less than the carrying amount of the unit, the impairment loss is
allocated first to reduce the carrying amount of any goodwill allocated to the
unit and then to the other assets of the unit pro‑rata on the basis of the
carrying amount of each asset in the unit.
Assets that are subject to amortisation or depreciation are reviewed for
impairment whenever events or changes in circumstances indicate that the
carrying amount may not be recoverable. If any such condition exists, the
recoverable amount of the asset is estimated in order to determine the extent,
if any, of the impairment loss. Where the asset does not generate cash flows
that are independent from other assets, estimates are made of the cash flows
of the cash‑generating unit to which the asset belongs.
Recoverable amount is the higher of fair value, less costs to sell, and
value‑in‑use. In assessing value-in-use, estimated future cash flows are
discounted to their present value using a pre‑tax discount rate appropriate
to the specific asset or cash‑generating unit.
If the recoverable amount of an asset or cash‑generating unit is estimated
to be less than its carrying amount, the carrying value of the asset or
cash‑generating unit is reduced to its recoverable amount. Impairment losses
are recognised immediately in highlighted items in the income statement.
In respect of assets other than goodwill, an impairment loss is reversed if
there has been a change in the estimates used to determine the recoverable
amount. An impairment loss is reversed only to the extent that the asset's
carrying amount does not exceed the carrying amount that would have been
determined, net of depreciation or amortisation, if no impairment loss had
been recognised.
Leases
The Group has various lease arrangements for buildings, cars, and IT
equipment. Lease terms are negotiated on an individual basis locally. This
results in a wide range of different terms and conditions. At the inception of
a lease contract, the Group assesses whether the contract conveys the right to
control the use of an identified asset for a certain period in exchange for a
consideration, in which case it is identified as a lease. The Group then
recognises a right-of-use asset and a corresponding lease liability at the
lease commencement date. Lease‑related assets and liabilities are measured
on a present value basis. Lease‑related assets and liabilities are subjected
to re-measurement when either terms are modified or lease assumptions have
changed. Such an event results in the lease liability being re-measured to
reflect the measurement of the present value of the remaining lease payments,
discounted using the discount rate at the time of the change. The lease assets
are adjusted to reflect the change in the re‑measured liabilities.
Right-of-use assets
Right-of-use assets include the net present value of the following components:
· the initial measurement of the lease liability;
· lease payments made before the commencement date of the lease;
· initial direct costs; and
· costs to restore.
The right-of-use assets are reduced for lease incentives relating to the
lease. The right‑of‑use assets are depreciated on a straight‑line basis
over the duration of the contract. In the event that the lease contract
becomes onerous, the right-of-use asset is impaired for the part which has
become onerous.
Lease liabilities
Lease liabilities include the net present value of the following components:
· fixed payments excluding lease incentive receivables;
· future contractually agreed fixed increases; and
· payments related to renewals or early termination, in case options to
renew or for early termination are reasonably certain to be exercised.
The lease payments are discounted using the interest rate implicit in the
lease. If such rate cannot be determined, the lessee's incremental borrowing
rate is used, being the rate that the lessee would have to pay to borrow the
funds necessary to obtain an asset of similar value, in a similar economic
environment, with similar terms and conditions. The discount rate that is used
to calculate the present value reflects the interest rate applicable to the
lease at inception of the contract. Lease contracts entered into in a currency
different to the local functional currency are subjected to periodic foreign
currency revaluations which are recognised in the income statement in net
finance costs.
The lease liabilities are subsequently increased by the interest costs on the
lease liabilities and decreased by lease payments made.
Where a lease is not captured by IFRS 16 'Leases', the total rentals payable
under the lease are charged to the income statement on a straight‑line basis
over the lease term. The aggregate benefit of lease incentives is recognised
as a reduction of the rental expense over the lease term on a straight‑line
basis. The land and buildings elements of property leases are considered
separately for the purposes of lease classification.
Subleases
The Group acts as a lessor where premises have been sublet to an external
third party. Accordingly, the right-of-use asset has been derecognised and
instead a lease receivable recognised determined with reference to the net
present value of the future lease payments receivable from the tenant. Finance
income is then recognised over the lease term.
Onerous Leases
When an office space is considered surplus to requirements is vacated and
marketed, an onerous lease provision is recognised to reflect the impairment
of the right-of-use asset for the remaining period of the lease. Charges or
credits relating to the provision are treated as highlighted items. Details of
onerous lease provisions established in the year are given in Note 3.
Cash and cash equivalents
Cash and cash equivalents comprise cash in hand and short‑term deposits.
Cash and cash equivalents and bank overdrafts are offset when there is a
legally enforceable right to offset. Restricted cash is included in cash and
cash equivalent but identified separately. Where cash balances are not
available for general use by the Group, for example due to legal restrictions,
they are identified and disclosed as restricted cash.
Financial instruments
Financial assets and financial liabilities are recognised in the Group's
statement of financial position when the Group becomes a party to the
contractual provisions of the instrument.
For financial instruments measured using amortised cost measurement (that is,
financial instruments classified as amortised cost and debt financial assets
classified as FVOCI), changes to the basis for determining the contractual
cash flows required by interest rate benchmark reform are reflected by
adjusting their effective interest rate. No immediate gain or loss is
recognised. A similar practical expedient exists for lease liabilities.
The amendments have no material impact on the Group's financial instruments.
Comparative amounts have not been restated, and there was no impact on the
current period opening reserves amounts on adoption.
Financial assets
They arise principally through the provision of goods and services to
customers (trade receivables), but also incorporate other types
of contractual monetary assets. They are initially recognised at fair value
plus transaction costs that are directly attributable to their acquisition or
issue and are subsequently carried at amortised cost using the effective
interest rate method, less provision for impairment.
Impairment provisions are recognised when there is objective evidence (such as
significant financial difficulties on the part of the counterparty or default
or significant delay in payment) that the Group will be unable to collect all
of the amounts due, the amount of such a provision being the difference
between the net carrying amount and the present value of the future expected
cash flows associated with the impaired receivable. For trade receivables,
which are reported net, such provisions are recorded in a separate allowance
account with the loss being recognised within other operating expenses. On
confirmation that the trade receivable will not be collectable, the gross
carrying value of the asset is written off against the associated provision.
Financial liabilities
Borrowings consisting of interest‑bearing secured and unsecured loans and
overdrafts are initially recognised at fair value net of directly attributable
transaction costs incurred and subsequently measured at amortised cost using
the effective interest method. The difference between the proceeds received
net of transaction costs and the redemption amount is amortised over the
period of the borrowings to which they relate. The revolving credit facility
is considered to be a long-term loan.
Trade and other payables are initially recognised at their nominal value,
which is usually the original invoiced amount.
Share capital
Equity instruments issued by the Group are recorded at the amount of the
proceeds received, net of direct issuance costs.
Executive Share Option Plan ('ESOP')
As the Company is deemed to have control of its ESOP trust, it is treated as a
subsidiary and consolidated for the purposes of the Group financial
statements. The ESOP's assets (other than investments in the Company's
shares), liabilities, income and expenses are included on a line‑by‑line
basis in the Group financial statements. The ESOP's investment in the
Company's shares is deducted from shareholders' equity in the Group statement
of financial position as if they were treasury shares.
Share‑based payments
Where equity‑settled share options are awarded to employees, the fair value
of the options at the date of grant is charged to the income statement over
the vesting period with a corresponding increase recognised in retained
earnings. Fair value is measured using an appropriate valuation model.
Non‑market vesting conditions are taken into account by adjusting the number
of equity investments expected to vest at each year-end date so that,
ultimately, the cumulative amount recognised over the vesting period is based
on the number of options that eventually vest. A charge is made irrespective
of whether the market vesting conditions are satisfied. The cumulative expense
is not adjusted for failure to achieve a market vesting condition.
Where there are modifications to share‑based payments that are beneficial to
the employee, then as well as continuing to recognise the original
share‑based payment charge, the incremental fair value of the modified share
options as identified at the date of the modification is also charged to the
income statement over the remaining vesting period. Where the Group cancels
share options and identifies replacement options, this arrangement is also
accounted for as a modification.
The grant by the Company of options over its equity instruments to the
employees of subsidiary undertakings in the Group is treated as a capital
contribution.
The fair value of employee services received, measured by reference to the
grant date fair value, is recognised over the vesting period as an increase to
investment in subsidiary undertakings, with a corresponding credit to equity
in the parent entity financial statements.
Provisions
Provisions, including provisions for onerous lease costs, are recognised when
the Group has a present legal or constructive obligation as a result of past
events, it is probable that an outflow of resources will be required to settle
that obligation and the amount can be reliably estimated. Provisions are not
recognised for future operating losses.
Provisions are measured at the Directors' best estimate of the expenditure
required to settle the obligation at the year‑end date. If the effect of the
time value of money is material, provisions are determined by discounting the
expected future cash flows at a pre‑tax rate which reflects current market
assessments of the time value of money and, where appropriate, the risks
specific to the obligations.
Retirement benefits
For defined contribution pension schemes, the Group pays contributions to
privately administered pension plans on a voluntary basis. The Group has no
further payment obligations once the contributions have been paid.
Contributions are charged to the income statement in the year to which they
relate.
Dividend distribution
Dividend distribution to the Company's shareholders is recognised as a
liability in the Group's financial statements in the period in which the
dividends are approved by the Company's shareholders.
Critical accounting judgements and key sources of estimation uncertainty
In preparing the consolidated financial statements, the Directors have made
critical accounting judgements in applying the Group's accounting policies.
This year the key judgement related to the identification of acquired
intangible assets.
Identification of acquired intangible assets
As part of accounting for acquisitions under IFRS3, the Group must identify
and value the intangible assets it has acquired such as customer
relationships, intellectual property, brand names and software. Their
identification of these intangibles requires judgement following an assessment
of the acquired business. This involves reviewing the past performance of the
acquiree and future forecasts to ascertain the intangible assets to which the
purchase price should be allocated and their fair value. See note 16 for
details.
The Directors have also made critical accounting estimates due to the need to
make assumptions about matters which are often uncertain. Actual results may
significantly differ from those estimates. These estimates include
determination of contingent consideration, the inputs used in impairment
assessments, inputs to share option accounting fair value models and amounts
to capitalise as intangible assets. They are arrived at with reference to
historical experience, supporting detailed analysis and, in the case of
impairment assessments and share option accounting, external economic factors.
Contingent consideration
The Group has recorded liabilities for contingent consideration on
acquisitions made in the current and prior periods. The calculation of the
contingent consideration liability requires estimates to be made regarding the
forecast future performance of these businesses for the earn‑out period.
See note 16 for details.
Any changes to the fair value of the contingent consideration after the
measurement period are recognised in the income statement as a highlighted
item.
Carrying value of goodwill and other intangible assets
Impairment testing requires management to estimate the value‑in‑use of the
cash‑generating units to which goodwill and other intangible assets have
been allocated. The value‑in-use calculation requires estimation of future
cash flows expected to arise from the cash‑generating unit and the
application of a suitable discount rate in order to calculate present value.
The sensitivity around the selection of particular assumptions including
growth forecasts and the pre‑tax discount rate used in management's cash
flow projections could significantly affect the Group's impairment evaluation
and therefore the Group's reported assets and results.
Further details, including a sensitivity analysis, are included in note 7.
Adoption of new standards and interpretations
The Group has applied the following standards and amendments for the first
time for the annual reporting period commencing 1 January 2022:
· Interest Rate Benchmark Reform - amendments to IFRS 9, IAS 9 and
IFRS 7 and IFRS as issued in August 2020. In accordance with the transition
provisions, the amendments have been adopted retrospectively to hedging
relationships and financial instruments.
The amendments listed above did not have any impact on the amounts recognised
in prior periods and are not expected to significantly affect the current or
future periods.
For financial instruments measured using amortised cost measurement (that is,
financial instruments classified as amortised cost and debt financial assets
classified as FVOCI), changes to the basis for determining the contractual
cash flows required by interest rate benchmark reform are reflected by
adjusting their effective interest rate. No immediate gain or loss is
recognised. A similar practical expedient exists for lease liabilities.
The amendments have no material impact on the Group's financial instruments.
Comparative amounts have not been restated, and there was no impact on the
current period opening reserves amounts on adoption.
The following new standards have been published that are mandatory to the
Group's future accounting periods but have not been adopted early in these
financial statements:
· Property, Plant and Equipment: Proceeds before intended use -
amendments to IAS 16
· Onerous Contracts Cost of Fulfilling a Contract - amendments to IAS
37
· Annual Improvements to IFRS Standards 2018-2020 Cycle effective on or
after 1 January 2022
· Classification of Liabilities as Current or Non-current -Amendments
to IAS 1 1 January 2023 (deferred from 1 January 2022)
· Disclosure of Accounting Policies - Amendments to IAS 1 and IFRS
Practice Statement 2 effective on or after 1 January 2023
· Definition of Accounting Estimates- Amendments to IAS 8 effective on
or after 1 January 2023
· Deferred Tax related to Assets and Liabilities arising from a Single
Transaction - Amendments to IAS 12 effective on or after 1 January 2023
· Sale or contribution of assets between an investor and its associate
or joint venture -Amendments to IFRS 10 and IAS 28 effective on or after 1
January 2023
The adoption of the standards listed above is not expected to significantly
affect future periods.
2. Segmental reporting
In accordance with IFRS 8, the Executive Directors have identified the
operating segments based on the reports they review as the chief operating
decision-maker ('CODM') to make strategic decisions, assess performance and
allocate resources. The definition of these segments has been changed this
year and the operating segments are now deemed to be the regional operations
instead of the two global practices reported on in previous years. The
comparative segmental reporting for 2021 has been re-stated to reflect this
change.
Certain operating segments have been aggregated to form four reportable
segments: UK & Ireland ("UK&I"), Continental Europe, North America and
Asia Pacific ("APAC").
The Group's chief operating decision‑makers assess the performance of the
operating segments based on revenue and operating profit before highlighted
items. This measurement basis excludes the effects of non‑recurring
expenditure from the operating segments such as restructuring costs and
purchased intangible amortization. The measure also excludes the effects of
equity‑settled share‑based payments. Interest income and expenditure are
not allocated to segments, as this type of activity is driven by the central
treasury function, which manages the cash position of the Group.
Year ended/as at 31 December 2022
UK & Continental North America APAC Reportable segments Unallocated Total
Ireland Europe
£'000 £'000 £'000 £'000 £'000 £'000 £'000
Revenue 31,528 21,855 13,310 9,280 75,973 - 75,973
Operating profit/(loss) before highlighted items 6,552 6,449 913 1,943 15,857 (6,587) 9,270
Total assets 32,963 43,604 17,757 11,911 106,235 2,937 109,172
Year ended/as at 31 December 2021 (re-stated)
UK & Ireland Continental Europe North America APAC Reportable segments Unallocated Total
£'000 £'000 £'000 £'000 £'000 £'000 £'000
Revenue 32,279 17,354 5,565 7,893 63,091 - 63,091
Operating profit/(loss) before highlighted items 7,095 4,142 (598) 836 11,474 (6,737) 4,737
Total assets 33,062 21,199 6,051 12,316 72,628 2,883 75,511
A reconciliation of segment operating profit before highlighted items to total
profit before tax is provided below:
Year ended Year ended
31 December 31 December
2022 2021
£'000 £'000
Reportable segment operating profit before highlighted items 15,857 11,474
Unallocated (costs)/income(1):
Staff costs (3,816) (3,805)
Property costs (949) (1,457)
Exchange rate movements 541 (22)
Other operating expenses (2,363) (1,453)
Operating (loss)/profit before highlighted items 9,270 4,737
Highlighted items (note 3) (15,168) (9,815)
Operating loss (5,898) (5,078)
Net finance costs (1,303) (633)
Loss before tax (7,201) (5,711)
1. Unallocated (costs)/income comprise central costs that are not
considered attributable to the segments.
Unsatisfied long-term contracts
The following table shows unsatisfied performance obligations results from
long-term contracts:
Year ended Year ended
31 December 31 December
2022 2021
£'000 £'000
Aggregate amount of the transaction price allocated to long-term contracts
that are partially or fully unsatisfied as at 31 December 2022:
Within one year 21,573 21,732
Within more than one year 1,580 1,070
Prior year figures have been restated to reflect the above categorisation
Significant changes in contract assets and liabilities
Contract assets have increased from £5,172,000 to £6,464,000 and contract
liabilities have increased from £5,307,000 to £8,083,000 from 31 December
2021 to 31 December 2022. This increase is due in part to the addition of
contract assets and liabilities arising in the businesses acquired during the
year.
A reconciliation of segment total assets to total consolidated assets is
provided below:
Year ended Year ended
31 December 31 December
2022 2021
£'000 £'000
Total assets for reportable segments 106,235 72,628
Unallocated amounts: -
Property, plant and equipment 3 -
Other intangible assets 1,593 187
Other receivables 542 964
Cash and cash equivalents 799 1,147
Deferred tax asset - 585
Total assets 109,172 75,511
The table below presents non‑current assets by geographical location:
Year ended Year ended
31 December 31 December
2022 2021
£'000 £'000
Non‑current Non‑current
assets assets
£'000 £'000
UK & Ireland 16,511 19,922
Continental Europe 26,709 10,797
North America 11,538 2,342
Asia Pacific 5,706 5,848
60,464 38,909
Deferred tax assets 2,199 1,388
Total 62,663 40,297
No single customer (or group of related customers) contributes 10% or more of
revenue.
3. Highlighted items
Highlighted items comprise charges and credits which are highlighted in the
income statement because separate disclosure is considered relevant in
understanding the underlying performance of the business. These are used for
the calculation of certain Alternative Performance Measures. For further
information and reconciliation please see page 17.
31 December 2022 31 December
2021
Total Total
£'000 £'000
Other operating expenses
Share option charge 553 459
Amortisation of purchased intangibles 2,739 1,065
Post-date remuneration for Digital Decisions 7,866 7,922
Impairment of goodwill and current assets 262 -
Severance and reorganisation costs 584 87
Onerous Lease Provision movement 1,272 -
Acquisition related costs 1,892 282
Total highlighted items before tax 15,168 9,815
Taxation charge/(credit) (1,799) (531)
Total highlighted items 13,369 9,284
The share option charge reflects the expense for the period arising from the
cost of share options granted at fair value, recognised over the vesting
period. For the period ended 31 December 2022, a charge of £553,000 (2021:
£459,000) was recorded.
The amortisation charge for purchased intangible assets increased
significantly in the year to £2,739,000 (2021: £1,065,000) due to the
addition of intangible assets through the acquisitions of MMi and Media Path.
These assets include customer relationships of acquired entities, owned
software (MMi's Circle Audit system) and Media Path's GMP licence asset.
A final accrual of £7,866,000 (2021: £7,922,000) has been made for post-date
remuneration due to be paid in 2023 relating to the acquisition of Digital
Decisions B.V. in 2020. The total amount to be paid is estimated at £15.8
million.
An impairment charge of £257,000 has been made to reflect the planned
divestment of the Group's majority stake in Ebiquity Russia OOO for a nominal
value. This comprises a provision of £179,000 against the Group's share (75%)
of the total assets excluding cash and goodwill impairment of £78,000 and
£5,000 in respect of other assets..
Total severance and reorganisation costs of £584,000 (31 December 2021:
£87,000) were recognised during the year, relating to seven senior roles
across the Group which were eliminated during the year.
The onerous lease provision charge of £1,225,000 relates to office space in
three cities which is surplus to requirements. During the year, it was decided
to vacate the New York office and part of the London office and to seek
sub-tenants for these. A charge in the year of £1,741,000 has been made for
these offices to reflect the impairment of the right-of-use asset. This is
offset by a credit of £516,000, which reflects the reduction in the lease
liability relating to the Chicago office which was vacated and sub-let in 2019
and for which the head-lease has now been terminated with effect from
September 2023.
Three acquisitions were made in 2022 and an equity fundraise was arranged and
the banking facility was increased and extended to finance these. The charge
of £1,892,000 (2021: £282,000) relates to the professional and related costs
incurred in undertaking these transactions. The charge comprises the
following:
£000
Acquisition of Media Path 489
Acquisition of MMi (Media Management LLC) 308
Equity placing 764
Renegotiation of Bank Facility Agreement 317
Acquisition of Forde & Semple (Canada) 14
Total 1,892
The total tax credit of £1,799,000 (2021: credit of £531,000) comprises a
current tax credit of £883,000 and a deferred tax credit of £916,000. The
current tax credit includes a credit of £216,000 for the partial release of a
provision set up in 2018 relating to an IRS enquiry into Ebiquity Inc's tax
assessments for 2015 and 2016, which was determined during the year. It also
includes a credit of £487,000 for the release of a provision made in 2013 for
tax risks relating to intra-Group management charges and royalties which is no
longer considered necessary. Details of other tax items are set out in note
4.
4. Taxation charge/(credit)
The difference between tax as charged/(credited) in the financial statements
and tax at the nominal rate is explained below:
Year ended 31 December 2022 Year ended 31 December 2021
Before Before
highlighted Highlighted highlighted Highlighted
items items Total items items Total
£'000 £'000 £'000 £'000 £'000 £'000
UK tax
Current year 114 (101) 13 (30) (42) (72)
Adjustment in respect of prior years 386 - 386 52 - 52
500 (101) 399 22 (42) (20)
Foreign tax
Current year 1,973 (295) 1,678 1,363 (22) 1,341
Adjustment in respect of prior years (33) (487) (520) (9) - (9)
1,940 (782) 1,158 1,354 (22) 1,332
Total current tax 2,440 (883) 1,557 1,376 (64) 1,312
Deferred tax
Origination and reversal of temporary differences (note 21) (380) (916) (1,296) 376 (467) (91)
Adjustment in respect of prior years - - - (15) - (15)
Total tax charge/(credit) 2,060 (1,799) 261 1,737 (531) 1,206
The difference between tax as charged/(credited) in the financial statements
and tax at the nominal rate is explained below:
Year ended Year ended
31 December 31 December
2022 2021
£'000 £'000
Loss before tax (7,201) (5,711)
Corporation tax at 19% (31 December 2021: 19.%) (1,368) (1,085)
Non‑deductible taxable expenses 1,570 3,598
Overseas tax rate differential 549 354
Overseas losses not recognised 97 (1,340)
Losses utilised not previously recognised (453) (349)
Adjustment in respect of prior years (134) 28
Total tax charge 261 1,206
Following the Finance Act 2021 (enacted as at 10 June 2021), the corporation
tax rate effect from 1 April 2023 will increase to 25% from 19%. The rate
change increase relates to the Finance Act 2021 not the latest Budget.
The table below shows a reconciliation of the current tax liability for each
year end:
£'000
At 31 December 2020 1,703
Corporation tax payments (2,616)
Corporation tax refunds 124
Withholding tax (47)
Under‑provision in relation to prior years 43
Provision for the year ended 31 December 2021 1,264
Foreign exchange (97)
At 31 December 2021 374
Corporation tax payments (2,183)
Corporation tax refunds 314
Withholding tax (39)
Under‑provision in relation to prior years (134)
Provision for the year ended 31 December 2022 1,691
Foreign exchange and other 266
At 31 December 2022(1) 290
(1) Tax liability excludes £14k recoverable withholding tax.
5. Earnings per share
The calculation of the basic and diluted earnings per share is based on the
following data:
Year ended Year ended
31 December 31 December
2022 2021
£'000 £'000
Earnings for the purpose of basic earnings per share, being net loss (7,495) (7,032)
attributable to equity holders of the parent
Adjustments:
Impact of highlighted items (net of tax)(1) 13,369 9,284
Earnings for the purpose of adjusted earnings per share 2,252
5,874
Number of shares:
Weighted average number of shares during the year
- basic 108,951,516 82,627,526
- dilutive effect of share options & contingently issuable shares 22,771,365 2,483,339
- diluted 131,722,881 85,110,865
Basic (loss) per share (6.88)p (8.51)p
Diluted (loss) per share (6.88)p (8.51)p
Adjusted basic earnings per share 5.39p 2.72p
Adjusted diluted earnings per share 4.46p 2.67p
1. Highlighted items attributable to equity holders of the parent (see
note 3), stated net of their total tax impact.
7. Goodwill
£'000
Cost
At 1 January 2021 37,751
Acquisitions -
Foreign exchange differences (447)
At 31 December 2021 37,304
Acquisitions 14,561
Foreign exchange differences 1,100
At 31 December 2022 52,965
Accumulated impairment
At 1 January 2021 (9,188)
Impairment -
Foreign exchange differences 56
At 31 December 2021 (9,132)
Impairment (78)
Foreign exchange differences (664)
At 31 December 2022 (9,874)
Net book value
At 31 December 2022 43,091
At 31 December 2021 28,172
The Group tests goodwill annually for impairment or more frequently if there
are indications that goodwill may be potentially impaired. Goodwill is
allocated to the Group's cash‑generating units ('CGUs') in order to carry
out impairment tests. The Group's remaining carrying value of goodwill by CGU
at 31 December was as follows:
Cash‑generating unit Reporting segment 31 December 31 December
2022 2021
£'000 £'000
Media UK and International UK and Ireland 9,257 9,232
Effectiveness UK and Ireland 1,678 1,678
Digital Decisions Europe 502 477
Germany Europe 4,325 4,316
Media Value Group (Iberia) Europe 3,157 2,994
France Europe 569 556
Italy Europe 397 376
Central and Eastern Europe Europe 260 337
Media Path Network Europe 7,608 -
North America (including MMi and Canada) North America 7,557 604
Australia APAC 2,413 2,304
China APAC 2,358 2,287
Digital Balance APAC 30 30
FirmDecisions Included in all segments 2,981 2,981
43,091 28,172
The impairment test involves comparing the carrying value of the CGU to which
the goodwill has been allocated to the recoverable amount. The recoverable
amount of all CGUs has been determined based on value-in-use calculations.
Under IFRS, an impairment charge is required for goodwill when the carrying
amount exceeds the recoverable amount, defined as the higher of fair value
less costs to sell and value-in-use.
Value-in-use calculations
The key assumptions used in management's value-in-use calculations are
budgeted operating profit, pre‑tax discount rate and the long‑term growth
rate.
Budgeted operating profit assumptions
To calculate future expected cash flows, management has taken the
Board-approved budgeted operating profit ('EBIT') for each of the CGUs for the
2023 financial year. For the 2024 and 2025 financial years, the forecast EBIT
is based on management's plans and market expectations. The forecast 2025
balances are taken to perpetuity in the model. The forecasts for 2024 and 2025
use certain assumptions to forecast revenue and operating costs within the
Group's operating segments.
Discount rate assumptions
The Directors estimate discount rates using rates that reflect current market
assessments of the time value of money and risk specific to the CGUs. The
factors considered in calculating the discount rate include of the risk-free
rate (based on government bond yields), the equity risk premium, the Group's
Beta and a smaller quoted company premium. The three‑year pre-tax cash flow
forecasts have been discounted at 13% (31 December 2021: between 10% and 13%).
Growth rate assumptions
For cash flows beyond the three‑year period a growth rate of 2% ( 2021: 2%)
has been assumed for all CGUs. This rate is based on factors such as
economists' estimates of long-term economic growth in the markets in which the
Group operates. In 2021 a rate of 2.6% was applied to China
The excess of the value-in-use to the goodwill carrying values for each CGU
gives the level of headroom in each CGU. The estimated recoverable amounts of
the Group's operations in all CGUs significantly exceed their carrying values,
except for the China and North America CGUs.
Sensitivity analysis
The Group's calculations of value-in-use for its respective CGUs are sensitive
to a number of key assumptions. Other than disclosed below, management does
not consider a reasonable possible change, in isolation, of any of the key
assumptions to cause the carrying value of any CGU to exceed its value-in-use.
For North America, the 2023 budgeted revenue and cost growth reflect the
inclusion of MMi and Media Path respectively for a full year compared to a
partial year in 2022. The considerations underpinning why management believes
no impairment is required in respect of China and North America are set out
below, showing the % points change in each key assumption that would result in
an impairment. The headroom for North America is £9.2 million and for China
is £1.4 million.
China North America
Current % % point change Current % % point change
(2023/2024/2025) leading to (2023/2024/2025) leading to
impairment impairment
Budgeted revenue growth 1%/8%/5% (7)%/(7)%/(8)% 31%/6%/5% (9)%/(10)%/(11)%
Budgeted cost growth 1%/3%/3% 8%/9%10% 25%/3%/3% 12%/12%/14%
Pre‑tax discount rate 13%/13%/13% 6% 13%/13%/13% 9%
8. Other intangible assets
Capitalised Computer software Purchased Total
development £'000 intangible intangible
costs Assets assets
£'000 £'000 £'000
Cost
At 1 January 2021 4,891 2,542 16,581 24,014
Additions 970 13 - 983
Acquisitions - - - -
Disposals (902) - - (902)
Foreign exchange differences (60) (34) (318) (412)
At 31 December 2021 4,899 2,521 16,263 23,683
Additions 276 11 - 287
Acquisitions (see note 28) 4,260 - 10,689 14,949
Disposals - (30) - (30)
Foreign exchange differences 54 29 445 528
At 31 December 2022 9,489 2,531 27,397 39,417
Amortisation and impairment(2)
At 1 January 2021 (1,745) (2,147) (13,987) (17,879)
Charge for the year(3) (1,218) (211) (1,065) (2,494)
Disposals 902 - - 902
Foreign exchange differences 39 33 244 316
At 31 December 2021 (2,022) (2,325) (14,808) (19,155)
Charge for the year(3) (1,089) (195) (2,739) (4,023)
Acquisitions (see note 28) (3,041) - - (3,041)
Impairment - 14 - 14
Disposals - 31 - 31
Foreign exchange differences (35) (27) (404) (466)
At 31 December 2022 (6,187) (2,502) (17,952) (26,640)
Net book value
At 31 December 2022 3,302 29 9,445 12,777
At 31 December 2021 2,877 196 1,455 4,528
1. Purchased intangible assets consist principally of customer
relationships with a typical useful life of three to ten years.
2. No impairment charge has been recognised in the current year (year
ended 31 December 2021: £nil following management's review of the carrying
value of other intangible assets).
3. Amortisation is charged within other operating expenses so as to
write off the cost of the intangible assets over their estimated useful lives.
The amortisation of purchased intangible assets is included as a highlighted
expense.
9. Right-of-use assets and lease liabilities
Buildings Equipment Vehicles Total
£'000 £'000 £'000 £'000
Cost
At 1 January 2021 9,789 229 153 10,171
Additions 474 - - 474
Disposals (210) - - (210)
Foreign exchange (167) (33) 13 (187)
At 31 December 2021 9,886 196 166 10,248
Additions 2,358 - - 2,358
Impairment for the year (4,044) - - (4,044)
Foreign exchange 472 9 8 489
At 31 December 2022 8,672 205 174 9,051
Accumulated depreciation
At 1 January 2021 (3,805) (99) (30) (3,934)
Charge for the year (1,865) (42) (47) (1,954)
Disposals 96 - - 96
Foreign exchange 65 24 (3) 86
At 31 December 2021 (5,509) (117) (80) (5,706)
Charge for the year (1,998) (42) (39) (2,079)
Impairment for the year 2,303 - - 2,303
Foreign exchange (252) (5) (4) (261)
At 31 December 2022 (5,456) (164) (123) (5,743)
Net book value
At 31 December 2022 3,216 41 51 3,308
At 31 December 2021 4,377 79 86 4,542
Lease liabilities
Buildings Equipment Vehicles Total
£'000 £'000 £'000 £'000
Cost
At 1 January 2021 7,858 174 126 8,158
Additions 412 - - 412
Cash payments in the year (2,180) (49) (45) (2,274)
Interest charge in the year 216 3 3 222
Foreign exchange (95) (41) 9 (127)
At 31 December 2021 6,211 87 93 6,391
Additions 1,842 - - 1,842
Cash payments in the year (2,717) (47) (40) (2,804)
Interest charge in the year 219 2 2 223
Foreign exchange 322 4 5 331
At 31 December 2022 5,877 46 60 5,983
Current 1,304 10 14 1,328
Non-current 4,573 36 46 4,655
The future value of the minimum lease payments are as follows:
Minimum lease payments
31 December 31 December
2022 2021
£'000 £'000
Amounts due:
Within one year 2,580 2,722
Between one and two years 1,258 2,038
Between two and three years 774 913
Between three and four years 653 597
Between four and five years - 446
Later than five years - -
5,265 6,716
Lease receivables
31 December 31 December
2022 2021
£'000 £'000
Lease receivables 141 301
Current 141 146
Non-current - 155
In 2019 a sublease was entered into relating to the Chicago office, which had
been vacated. Accordingly, the right-of-use asset was de-recognised and a
lease receivable was recognised, being the equivalent of the remaining lease
receivables over the lease term. The amount due within one year is presented
within current assets and the amount due after one year is presented within
non-current assets. The sublease expires in September 2023 at the same time as
the head lease to which it relates.
Due to the reduced occupancy of the London office following the pandemic, one
of the three floors is now considered surplus to requirements and tenants are
being sought to take a sub-lease until July 2024 when the main lease can be
terminated. It was decided in December 2022 to vacate the fourth floor while
the space is being marketed. An onerous lease provision has therefore been
established for the remaining term of the lease from January 2023 until July
2024. This resulted in a charge of £384,000 in the year for the impairment of
the right-of-use asset.
Following the pandemic, the New York office, situated at William Street, is no
longer being occupied and is being marketed. An onerous lease provision has
been established for the remaining period of the lease until June 2025. This
resulted in a charge of £1,357,000 in the year for the impairment of the
right-of-use asset.
10. Trade and other receivables
31 December 31 December
2022 2021
£'000 £'000
Trade and other receivables due within one year
Net trade receivables 23,332 14,406
Other receivables 2,177 1,688
Prepayments 1,190 668
Contract assets 6,464 5,172
33,163 21,934
Contract assets are assets from performance obligations that have been
satisfied but not yet billed.
Trade and other receivables represent management's best estimate of the amount
expected to be recovered by the Group through the completion accounts and
expected loss model. The Group considers there to be no material difference
between the fair value of trade and other receivables and their carrying
amount in the balance sheet.
11. Trade and other payables
31 December 31 December
2022 2021
£'000 £'000
Trade payables 6,171 3,290
Other taxation and social security 2,949 2,287
Deferred tax - current 276 390
Other payables 654 948
10,049 6,915
The Directors consider that the carrying amounts of trade and other payables
are reasonable approximations of their fair value.
12. Accruals and contract liabilities
31 December 31 December
2022 2021
£'000 £'000
Accruals 5,526 6,120
Post-date remuneration(1) 15,790 7,922
Contract liabilities(2) 8,083 5,308
Total accruals and contract liabilities 29,399 19,350
(1)Post-date remuneration relates to the acquisition of Digital Decisions BV
payable in May 2023. See note 3. (2)Contract liabilities are receipts in
advance from customers prior to satisfaction of performance obligations.
13. Financial liabilities
31 December 31 December
2022 2021
£'000 £'000
Current
Deferred consideration(2) 61 -
Non‑current
Bank borrowings 21,500 18,000
Government borrowings - -
Loan fees(1) (265) (99)
Contingent consideration(3) 2,122 -
23,357 17,901
Total financial liabilities 23,418 17,901
(1) Loan fees were payable on amending the banking facility and are being
recognised in the income statement on a straight-line basis until the maturity
date of the facility in September 2025. Non-current loan fees includes current
fees. (2) Deferred consideration relates to the acquisition of Forde and
Semple and was payable in January 2023. (3) Contingent consideration relates
to the acquisition of MMi and is payable in 2025.
Bank Government Contingent Total
borrowings borrowings consideration £'000
£'000 £'000 £'000
At 1 January 2021 18,880 750 1,957 21,587
Paid (1,036) - (1,971) (3,007)
Charged to the income statement 57 (723) 41 (625)
Discounting charged to the income statement - - 45 45
Borrowings - - - -
Foreign exchange recognised in the translation reserve - (27) - (27)
Foreign exchange released to the income statement - - (72) (72)
At 31 December 2021 17,901 - - 17,901
Paid (1,300) - - (1,300)
Recognised on acquisition - - 2,183 2,183
Charged to the income statement 134 - - 134
Borrowings 4,500 - - 4,500
At 31 December 2022 21,235 - 2,183 23,418
A currency analysis for the bank borrowings is shown below:
31 December 31 December
2022 2021
£'000 £'000
Pounds sterling 21,235 17,901
Total bank borrowings 21,235 17,901
All bank borrowings are held jointly with Barclays and NatWest. The current
revolving credit facility ("RCF") facility was agreed in March 2022 and runs
for a period of 3 years to March 2025, extendable for up to a further two
years with a total commitment of £30 million. £21.5 million had been drawn
as at 31 December 2022 (2021: £18 million). Under this agreement, annual
reductions in the facility of £1.25 million will apply from June 2023. The
remainder of any drawings is repayable on the maturity of the facility. The
facility may be used for deferred consideration payments on past acquisitions,
to fund future potential acquisitions, and for general working capital
requirements. The quarterly covenants applied since June 2022 are: interest
cover > 4.0x; adjusted leverage <2.5x and adjusted deferred
consideration leverage < 3.5x.
The previous facility which was in place up to March 2022 comprised a
revolving credit facility ('RCF') of £23 million plus £1 million available
as an overdraft for working capital purposes. The covenants applying to it
in the three months to 31 March 2022 were interest cover > 4.0, adjusted
leverage covenant initially at < 4.0, increasing to < 4.25 and again to
< 4.5 in March 2022.
Loan arrangement fees accrued in the period of £264,000 (2021: £99,000) are
offset against the term loan and are being amortised over the period of the
loan. £159,000 of loan arrangement fees has been included within creditors
due within one year and the balancing amount of £105,000 has been included
within creditors due after more than one year.
The facility bears variable interest at Barclays Bank SONIA rate plus a margin
ranging from 2.60% to 3.00%, depending on the Group's net debt to EBITDA
ratio. During the first six months of the facility, the margin was fixed at
3.0%
The undrawn amount of the revolving credit facility is liable to a fee of 40%
of the prevailing margin. The Group may elect to prepay all or part of the
outstanding loan subject to a break fee, by giving five business days' notice.
All amounts owing to the bank are guaranteed by way of fixed and floating
charges over the current and future assets of the Group. As such, a composite
guarantee has been given by all significant subsidiary companies in the UK,
USA, Australia, Germany, Denmark and Sweden.
14. Dividends
No dividends were paid or declared during the current and prior financial
years.
15. Cash generated from operations
Year ended Year ended
31 December 31 December
2022 2021
£'000 £'000
(Loss) before taxation (7,201) (5,711)
Adjustments for:
Depreciation (notes 12 and 13) 2,772 2,609
Amortisation (note 11) 4,023 2,495
(Gain)/loss on disposal 5 3
Impairment of goodwill and current assets 257 -
Unrealised foreign exchange loss (70) 70
Onerous lease provision (release)/booked 1,272 -
Share option (credits)/charges 521 319
Finance income (note 6) (70) (20)
Finance expenses (note 6) 1,422 882
US PPP release - (720)
Contingent consideration revaluations (note 3) 7,866 7,397
10,797 7,324
(Increase)/decrease in trade and other receivables (8,772) 2,250
Increase/(decrease) in trade and other payables 1,817 2,226
Movement in provisions (29) -
Cash generated from operations 3,812 11,800
16. Acquisitions
On 29 January 2022, the Group acquired 100% shares of Forde and Semple Media
Works, the leading media performance consultancy in Canada, for a total
consideration of CAD$1.3 million (£0.8 million), of which CAD$1.2 million
(£0.7 million) was paid on completion and CAD$0.1 million (£0.06 million)
was deferred for one year. Forde and Semple had revenues of CAD$1.1m in the
financial year ended 31 January 2021 and net assets of CAD$0.4 million (£0.2
million) on completion. The company has been renamed Ebiquity Canada Inc and
contribute revenue of £0.3 million in the year and operating profit of £0.2
million.
On 4 April 2022, the Group acquired 100% shares of Media Management, LLC
("MMi"), a US-based media audit specialist, for an initial consideration of US
$8.0 million (£6.1 million) with a deferred contingent consideration element
payable in 2025. 84% of the initial consideration (US$6.7 million/£5.1
million) was paid in cash and 16% (US$1.3 million /£1.0 million), was applied
by the vendors to subscribe for 1,737,261 Ebiquity ordinary shares. The
contingent consideration will be based on 1.0 times adjusted earnings before
interest and tax of the combined Ebiquity US and MMi businesses reported for
the year ending 31 December 2024. This has been estimated to be US4.0 million
/£3.0 million. 80% of this will be payable directly in cash to the vendors
and 20% will be applied by the vendors to subscribe for Ebiquity ordinary
shares. MMi contributed revenue of £3.4 million to the Group since its
acquisition. Its business has been integrated fully within the North America
unit and therefore it is not possible to report a separate profit figure for
it.
On 22 April 2022, the Group acquired 100% shares of Media Path Network AB
("Media Path"), a Swedish-based multi-national media consultancy, for a
consideration of £15.5 million. 75% (£11,625,000) was paid in cash and 25%
(£3,875,000) was paid by the issue of 6,919,642 new Ordinary Shares to the
Media Path vendors. An additional cash payment of £485,000 was made in June
2022 representing working capital in the completion accounts as at 31 March
2022 in excess of the contractually agreed target amount. Media Path
contributed revenue of £3.4 million to the Group since its acquisition and an
operating profit of £0.8 million.
An assessment of fair value of the acquired net assets of each company has
been made as at 31 December 2022 as follows:
Forde and Semple Media Works
The fair value of the purchase consideration for the acquisition of Forde and
Semple is as follows:
£'000
Cash 703
Deferred Consideration 64
767
The carrying value and the provisional fair value of the net assets recognised
at the date of acquisition are:
Carrying FV Fair value
Value adjustment £'000
£'000 £'000
Property, plant and equipment 3 - 3
Trade and other receivables 245 - 245
Cash and cash equivalents 59 - 59
Trade and other payables (246) - (246)
Deferred tax liabilities - - -
Net assets acquired 61 - 61
Goodwill arising from the acquisition - - 706
Total purchase consideration 767
The goodwill arising reflects Forde and Semple's market leading position in
Canada and the benefits to the Group of retaining profits on projects
previously outsourced to the company.
Media Management LLC ("MMi")
The fair value of the purchase consideration for the acquisition of Media
Management LLC is as follows:
£'000
Cash 5,126
Shares 976
Contingent Consideration 2,121
8,223
The carrying value and the provisional fair value of the net assets recognised
at the date of acquisition are as follows:
Carrying value FV adjustment Fair value
£'000 £'000 £'000
Customer contracts and relationships - 1,442 1,442
Technology - acquired software 973 687 1,660
Property, plant and equipment 63 - 63
Trade and other receivables 976 - 976
Bank overdraft (35) - (35)
Trade and other payables (2,131) - (2,131)
Deferred tax liabilities - - -
Net assets acquired (154) 2,129 1,975
Goodwill arising on acquisition 6,248
Total purchase consideration 8,223
Goodwill reflects the benefits of MMI's customer base in USA and its Circle
Audit technology and the scale benefits expected from combining its business
with Ebiquity's 's existing US business.
Media Path Network AB
The fair value of the purchase consideration for the acquisition of Media Path
Network is as follows:
£'000
Cash 12,110
Shares 3,875
15,985
The carrying value and the provisional fair value of the net assets recognised
at the date of acquisition are as follows:
Carrying value £'000 FV adjustment £'000 Fair value £'000
Customer contracts and relationships - 6,107 6,107
License Agreement - 2,453 2,453
Property, plant and equipment 8 - 8
Cash and cash equivalents 824 - 824
Trade and other receivables 2,068 - 2,068
Trade and other payables (1,320) - (1,320)
Deferred tax liabilities - (1,763) (1,763)
Net assets acquired 1,580 6,797 8,377
Goodwill arising on acquisition 7,608
Total purchase consideration 15,985
Goodwill reflects Media Path's global market position and customer base as
well as its licence over the GMP technology platform and benefits this
offers.
17. Financial Information
The financial information included in this report does not amount to full
financial statements within the meaning of Section 434 of Companies Act 2006.
The financial information has been extracted from the Group's Annual Report
and financial statements for the period ended 31 December 2022, on which an
unqualified report has been made by the Company's auditors, Deloitte LLP.
Financial statements for the period ended 31 December 2021 have been delivered
to the Registrar of Companies; the report of the auditors on those accounts
was unqualified and did not contain a statement under Section 498 of the
Companies Act 2006.
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. END FR URSVROVUOORRRecent news on Ebiquity
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